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DASEKE, INC. AND SUBSIDIARIESNOTE 8 – INCOME TAXES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(Unaudited)
NOTE 9 – LONG-TERM DEBT – (Continued)
Capital Leases
The Company leases certain equipment under long-term capital lease agreements that expire on various dates through June 2024. As of September 30, 2017 and December 31, 2016, the book value of the property and equipment recorded under capital leases was $5.6 million and $24.1 million, net of accumulated depreciation of $5.0 million and $17.0 million, respectively. Depreciation expense related to leased equipment was $0.6 million and $1.8 millioneffective tax rates for the three months ended SeptemberJune 30, 20172022 and 2016, respectively,2021 were 30.3% and $1.8 million and $5.3 million23.3%, respectively. The effective tax rates for the ninesix months ended SeptemberJune 30, 20172022 and 2016,2021 were 26.6% and 26.1%, respectively.
Main Street Capital Corporation
In 2013, Main Street Capital Corporation (Main Street) loaned The difference between the Company $20.0 million under a senior subordinated secured term loan (the Main Street Loan). The Main Street Loan was subordinateCompany’s effective tax rate and the federal statutory rate primarily results from the mix of earnings with state jurisdictions, combined with the impact of nontaxable income, primarily related to the PNC Credit Agreement and Equipment Term Loans. Interest payments were due monthly through maturity at the rate of 12% per annum. Paid-in kind (PIK) interest, at a rate of 2.5% per annum, could have been paid monthly or accrued and added to the principal balance quarterly, at the optionchange in fair value of the Company. For the nine months ended September 30, 2017warrant liability, and year ended December 31, 2016, $0.1 millionnondeductible expenses, primarily related to executive compensation and $0.5 million, respectively, of accrued PIK interest was added to the principal balance and accrued PIK interest of $0.1 million was recorded in accrued expenses as of December 31, 2016. In conjunction with Business Combination, the Main Street Loan was repaid in February 2017. See Note 2 for additional details on the Business Combination.
Prudential Capital Partners
In 2013, the Company issued senior secured subordinated promissory notes in the initial aggregate principal amount of $20.0 million (PCP Subordinated Notes) to Prudential Capital Partners IV, L.P., Prudential Capital Partners (Parallel Fund) IV, L.P. and Prudential Capital Partners Management Fund IV, L.P. (collectively, the PCP Investors) pursuant to the Securities Purchase Agreement, dated as of November 12, 2013, by and among the Company, certain of its subsidiaries and the PCP Investors. The PCP Subordinated Notes were subordinate to the PNC Credit Agreement and Equipment Term Loans. Interest payments were due monthly through maturity at the rate of 12% per annum. PIK interest, at a rate of 2.5% per annum, could have been paid monthly or accrued and added to the principal balance quarterly, at the option of the Company. For the nine months ended September 30, 2017 and year ended December 31, 2016, $0.1 million and $0.5 million, respectively, of accrued PIK interest was added to the principal balance and $0.1 million accrued PIK interest was recorded in accrued expenses as of December 31, 2016. In conjunction with Business Combination, the PCP Subordinated Notes were repaid in February 2017. See Note 2 for additional details on the Business Combination.
The Main Street Loan and the PCP Subordinated Notes (Subordinated Debt) were collateralized by all assets of the Company, except those assets collateralizing the Equipment Term Loans. The Main Street Loan and the PCP Subordinated Notes contained certain financial covenants, including a minimum fixed charge coverage ratio, a senior secured debt to consolidated EBITDA ratio and a funded debt to consolidated EBITDA ratio. Additionally, they contained negative covenants limiting, among other things, additional indebtedness, capital expenditures, transactions with affiliates, additional liens, sales of assets, dividends, investments and advances, prepayments of debt, mergers and acquisitions, and other matters customarily restricted in such agreements. The Main Street Loan and the PCP Subordinated Notes were subject to a make-whole payment of 5.0% of the prepayment amount if such prepayment was made before the third anniversary of the agreements.
LST Seller
As part of the consideration paid to the seller of Lone Star Transportation, LLC and affiliates (LST), Daseke Lone Star, Inc. (a subsidiary of the Company) issued $22.0 million of subordinated notes (the LST Seller Notes). The LST Seller Notes bore interest at 10% payable monthly and were subordinate to the PNC Credit Agreement, Main Street Loan and PCP Subordinated Notes. In conjunction with the Business Combination, the LST Seller Notes were repaid in February 2017. See Note 2 for additional details on the Business Combination.
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DASEKE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(Unaudited)
NOTE 9 – LONG-TERM DEBT – (Continued)
DTR Sellers
As part of the consideration paid to the sellers of Davenport Transport & Rigging, LLC, LST issued $1.0 million of subordinated notes (the DTR Seller Notes). The DTR Seller Notes bore interest at 5% payable monthly and were subordinate to the PNC Credit Agreement, Main Street Loan and PCP Subordinated Notes. In conjunction with Business Combination, the DTR Seller Notes were repaid in February 2017. See Note 2 for additional details on the Business Combination.
BHE Sellers
As part of the consideration paid to the sellers of Bulldog Hiway Express (BHE), the Company issued $2.0 million of subordinated notes (the BHE Seller Notes). The BHE Seller Notes bore interest at 7% payable monthly. On December 19, 2016, a portion of the outstanding principal amount under the BHE Seller Notes was forgiven in exchange for the payment by the Company of certain pension liabilities of BHE. The BHE Seller Notes were subordinate to the PNC Credit Agreement and the Main Street Loan and the PCP Subordinated Notes. In conjunction with Business Combination, the BHE Seller Notes were repaid in February 2017. See Note 2 for additional details on the Business Combination.
Future Payments
Future principal payments on long-term debt as of September 30, 2017 are as follows (in thousands):
| | | | | | | | | | | | |
| | Term Loan Facility | | Equipment Term Loans | | Capital
Leases | | Total |
| | | | | | | | | | | | |
2017 | | $ | 3,485 | | $ | 20,875 | | $ | 2,387 | | $ | 26,747 |
2018 | | | 3,485 | | | 20,802 | | | 1,410 | | | 25,697 |
2019 | | | 3,485 | | | 17,226 | | | 822 | | | 21,533 |
2020 | | | 3,485 | | | 11,516 | | | 152 | | | 15,153 |
2021 | | | 3,485 | | | 5,037 | | | 61 | | | 8,583 |
Thereafter | | | 331,037 | | | 7,212 | | | 81 | | | 338,330 |
| | | | | | | | | | | | |
Total minimum lease payments | | | | | | | | | 4,913 | | | |
Loan amount attributable to interest | | | | | | | | | (373) | | | (373) |
| | | | | | | | | | | | |
Total (Present value of minimum lease payments on capital leases) | | $ | 348,462 | | $ | 82,668 | | | 4,540 | | $ | 435,670 |
Less current portion | | | | | | | | | (2,154) | | | |
Long-term capital leases | | | | | | | | $ | 2,386 | | | |
| | | | | | | | | | | | |
NOTE 10 – INCOME TAXES
The Company’s statutory federal tax rate is 35%.goodwill impairment. State tax rates vary among states and typically range from approximately 1%1% to 6%6%, although some state rates are higher and a small number of states do not impose an income tax. The effective tax ratesrate for the three months ended SeptemberJune 30, 2017 and 2016 were 101.8% and (119.0%), respectively, and 22.6% and (69.1%) for2022 differs from the nine months ended September 30, 2017 and 2016, respectively. The difference between the Company’s effective tax rate andfor the federal statutorysame period in 2021 primarily due to the permanent disallowance of goodwill impairment in the second quarter of 2022. The effective tax rate primarily results from state income taxes and nondeductible expenses, includingfor the effect ofsix months ended June 30, 2022 is relatively consistent with the per diem pay structure for drivers, transaction expenses and withdrawn Private Daseke IPO expenses. same period in 2021.
There were no0 changes in uncertain tax positions during the three and ninesix months ended SeptemberJune 30, 2017. As a result of the Business Combination, the Company had an Internal Revenue Code of 1986, as amended, section 382 ownership change, which will not impair the Company’s ability to utilize the net operating losses.
2022.
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DASEKE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(Unaudited)
NOTE 11 – STOCKHOLDERS’ EQUITY
Common Stock
On September 19, 2017, the Company and certain stockholders of the Company (the Selling Stockholders) entered into an underwriting agreement (the Underwriting Agreement) with Stifel, Nicolaus & Company, Incorporated and Cowen and Company, LLC, as representatives of the several underwriters named therein (collectively, the Underwriters), in connection with an underwritten public offering (the Offering) of 5,292,000 shares of the Company’s common stock, par value $0.0001 per share, including 4,882,167 shares of common stock to be sold by the Company and 409,833 shares of common stock to be sold by the Selling Stockholders, at a price to the public of $12.00 per share ($11.34 per share net of underwriting discounts and commissions). Pursuant to the Underwriting Agreement, the Company granted the Underwriters a 30-day option to purchase up to an additional 793,800 shares of common stock, which was exercised in full on September 20, 2017 and closed simultaneously with the Offering on September 22, 2017. Net proceeds received by the Company from its sale of 5,675,967 shares of common stock were approximately $63.6 million, after deducting underwriting discounts and commissions and estimated offering expenses payable by the Company. As described in the prospectus supplement, dated September 19, 2017, filed with the SEC on September 20, 2017, the Company intends to use the net proceeds from the Offering for general corporate purposes, which may include, among other things, working capital, capital expenditures, debt repayment or refinancing or the financing of possible future acquisitions.
Preferred Stock
At the Closing, the Company issued 650,000 shares of Series A Preferred Stock for cash of $65.0 million. Proceeds from the sales were part of the consideration received as part of a recapitalization and reverse acquisition completed in the Business Combination. See Note 2 for additional details about the Business Combination. The par value of Series A Preferred Stock is $0.0001 per share. Additional features of this preferred stock are as follows:
Under the Certificate of Designations, Preferences, Rights and Limitations of the Series A Preferred Stock (the Certificate of Designations), each share of Series A Preferred Stock will be convertible, at the holder’s option at any time, initially into approximately 8.6957 shares of the Company’s common stock (assuming a conversion price of approximately $11.50 per share), subject to specified adjustments as set forth in the Certificate of Designations. If any holder elects to convert its Series A Preferred Stock after the seven-year anniversary of the issue date, if the then-current Conversion Price (as defined in the Certificate of Designations) exceeds the Weighted Average Price (as defined in the Certificate of Designations) for the common stock during any ten consecutive Trading Days (as defined in the Certificate of Designations), at its option by delivery of a Notice of Conversion in accordance with Section 8(b) of the Certificate of Designations no later than five business days following such tenth consecutive Trading Day, to convert any or all of such holder’s shares of Series A Preferred Stock into, at the Company’s sole discretion, either common stock, cash or a combination of common stock and cash; provided, that the Company shall provide such converting holder notice of its election within two Trading Days of receipt of the Notice of Conversion; provided further, that in the event the Company elects to issue common stock for all or a portion of such conversion, the Conversion Rate for such conversion (subject to the limitations set forth in Section 11 of the Certificate of Designations) shall mean the quotient of the Liquidation Preference (as defined in the Certificate of Designations) divided by the average Weighted Average Price for the common stock during the 20 consecutive Trading Days commencing on the Trading Day immediately following the Trading Day on which the Company provided such notice. If the Company does not elect a settlement method prior to the deadline set forth in the Certificate of Designations, the Company shall be deemed to have elected to settle the conversion entirely in common stock. Based on the assumed conversion rate, a total of 5,652,171 shares of Series A Preferred Stock would be issuable upon conversion of all of the currently outstanding shares of Series A Preferred Stock.
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DASEKE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(Unaudited)
NOTE 11 – STOCKHOLDERS’ EQUITY – (Continued)
On or after the third anniversary of the initial issuance date but prior to the fifth anniversary of the initial issuance date, the Company will have the right, at its option, to give notice of its election to cause all outstanding shares of the Series A Preferred Stock to be automatically converted into shares of the Company’s common stock at the then-effective conversion rate, if the Weighted Average Price of Company’s common stock equals or exceeds 140% of the then-current conversion price for at least 20 trading days (whether or not consecutive) in a period of 30 consecutive trading days. On or after the fifth anniversary of the initial issuance date but prior to the seventh anniversary of the initial issuance date, the Company will have the right, at its option, to give notice of its election to cause all outstanding shares of the Series A Preferred Stock to be automatically converted into shares of Company’s common stock at the then-effective conversion rate, if the Weighted Average Price of Company’s common stock equals or exceeds 115% of the then-current conversion price for at least 20 trading days (whether or not consecutive) in a period of 30 consecutive trading days. On or after the seventh anniversary of the initial issuance date, the Company will have the right, at its option, to give notice of its election to cause all outstanding shares of the Series A Preferred Stock to be automatically converted into shares of Company’s common stock at the then-effective conversion rate, if the Weighted Average Price of Company’s common stock equals or exceeds the then-current conversion price for at least 10 consecutive trading days. If the Company undergoes certain fundamental changes (as more fully described in the Certificate of Designations but including, among other things, certain change-in-control transactions, recapitalizations, asset sales and liquidation events), each outstanding share of Series A Preferred Stock may, within 15 days following the effective date of such fundamental change and at the election of the holder, be converted into Company’s common stock at a conversion rate (subject to certain adjustments) equal to (i) the greater of (A) the sum of the conversion rate on the effective date of such fundamental change plus the additional shares received by holders of Series A Preferred Stock following such fundamental change (as set forth in the Certificate of Designations) and (B) the quotient of (x) $100.00, divided by (y) the greater of (1) the applicable holder stock price and (2) 66 2/3% of the closing sale price of the Company’s common stock on the issue date plus (ii) the number of shares of Company’s common stock that would be issued if any and all accumulated and unpaid dividends were paid in shares of Company’s common stock.
The Series A Preferred Stock contains limitations that prevent the holders thereof from acquiring shares of the Company’s common stock upon conversion that would result in (i) the number of shares beneficially owned by such holder and its affiliates exceeding 9.99% of the total number of shares of the Company’s common stock then outstanding or (ii) the Series A Preferred Stock being converted into more than 19.99% of the shares of the Company’s common stock outstanding on the initial issue date of the Series A Preferred Stock (subject to appropriate adjustment in the event of a stock split, stock dividend, combination or other similar recapitalization) without, in the latter instance, stockholder approval of such issuance.
Additional features of the Series A Preferred Stock are as follows:
| a.
| | Liquidation – In the event of liquidation, holders of Series A Preferred Stock have preferential rights to liquidation payments over holders of common stock. Holders of Series A Preferred Stock shall be paid out of the assets of the Company at an amount equal to $100 per share plus all accumulated and unpaid dividends.
|
| b.
| | Dividends – Dividends on the Series A Preferred Stock are cumulative at the Dividend Rate. The “Dividend Rate” is the rate per annum of 7.625% per share of Series A Preferred Stock on the liquidation preference ($100 per share). Dividends are payable quarterly in arrears in cash or, at the Company’s election and subject to the receipt of the necessary shareholder approval (to the extent necessary), in shares of the Company’s common stock. The Company’s board of directors declared quarterly dividends of $0.68 per share on April 24, 2017, and $1.91 per share on July 18, 2017, which were both then paid on July 28, 2017. As of September 30, 2017, accrued dividends of $1.2 million were recorded in accrued expenses and other liabilities.
|
| c.
| | Voting rights – Except as required by Delaware law, holders of the Series A Preferred Stock will have no voting rights except with respect to the approval of any material and adverse amendment to the Company’s certificate of incorporation, and certain significant holders of Series A Preferred Stock may have approval rights with respect to certain key economic terms of the Series A Preferred Stock, as set forth in the Certificate of Designations.
|
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DASEKE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(Unaudited)
NOTE 11 – STOCKHOLDERS’ EQUITY – (Continued)
As of December 31, 2016, 64,500 shares of Series B Preferred Stock were issued and outstanding. Private Daseke’s board of directors declared quarterly dividends on the Series B Preferred Stock of $18.75 per share on October 13, 2016 and $12.50 per share on February 21, 2017. Both the October 13, 2016 and February 21, 2017 dividends were paid on February 27, 2017. As of December 31, 2016, accrued dividends of $1.2 million were recorded in accrued expenses and other liabilities.
In February 2017, in connection with, and immediately prior to, the Closing, the Series B Preferred Stock were converted into 9,301,150 shares of Private Daseke’s common stock.
Warrants
At September 30, 2017, there were a total of 35,040,664 warrants outstanding to purchase 17,520,332 shares of the Company’s common stock.
Hennessy has issued warrants to purchase its common stock which were originally issued as part of units in the IPO (the Public Warrants). There are 19,959,908 Public Warrants outstanding. Hennessy has also issued 15,080,756 warrants (the Private Placement Warrants) to Sponsor in a private placement that closed simultaneously with the consummation of the IPO.
Each warrant entitles the registered holder to purchase one-half of one share of the Company’s common stock at a price of $5.75 per one-half of one share ($11.50 per whole share), subject to adjustment. The warrants may be exercised only for a whole number of shares of the Company’s common stock. No fractional shares will be issued upon exercise of the warrants. The warrants will expire on February 27, 2022, five years after the completion of the Business Combination, or earlier upon redemption or liquidation. The Warrants are listed on the NASDAQ market under the symbol DSKEW.
The Company may call the Public Warrants for redemption at a price of $0.01 per warrant if, and only if, the reported last sale price of the Company’s common stock equals or exceeds $24.00 per share for any 20 trading days within a 30-trading day period ending on the third trading day prior to the date the Company sends the notice of redemption to the Public Warrant holders.
NOTE 129 – STOCK-BASED COMPENSATION
On February 27, 2017, the Company and Hennessy’s common stockholders approvedUnder the 2017 Omnibus Incentive Plan (the(as amended from time to time, the Incentive Plan), whereby the Company may grant awards of stock options, stock appreciation rights, restricted stock, restricted stock units, other stock-based awards and performance awards. Under the Plan,As of June 30, 2022, the Company is authorized to issue up to 4.5has 0.7 million shares of common stock. All awards granted were authorizedstock available for issuance under the Plan.Incentive Plan, assuming the maximum potential number of shares that may be issued from outstanding awards.
Stock Options
The following table summarizes stock option grants under the Plan during the nine months ended September 30, 2017:
| | | | | | | | | | | | |
Grantee Type | | # of
Options
Granted | | Issued and
Outstanding | | Vesting
Period | | Weighted
Average
Exercise
Price | | Weighted Average
Grant Date
Fair Value |
| | | | | | | | | | | | |
Director Group | | 150,000 | | 150,000 | | 5 years | | $ | 9.98 | | $ | 654,000 |
Employee Group | | 1,305,500 | | 1,296,500 | | 5 years | | $ | 9.99 | | $ | 5,652,740 |
Total | | | | 1,446,500 | | | | | | | | |
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DASEKE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(Unaudited)
NOTE 12 – STOCK-BASED COMPENSATION – (Continued)
The Company’s calculations of the fair value of stock options granted during the nine months ended September 30, 2017 were made using the Black-Scholes option-pricing model. The fair value of the Company’s stock option grants was estimated utilizing the following assumptions for the nine months ended September 30, 2017:
| | |
Weighted average expected life
| | 6.5 years
|
Risk-free interest rate
| | 1.95% to 2.09%
|
Expected volatility
| | 40.4% to 40.6%
|
Expected dividend yield
| | 0.00%
|
Since the Company does not have a sufficient history of exercise behavior, expected term is calculated using the assumption that the options will be exercised ratably from the date of vesting to the end of the contractual term for each vesting tranche of awards. Risk-free interest rate is based on the U.S. Treasury yield curve for the period of the expected term of the stock option. Expected volatility is calculated using an index of publicly traded peer companies.
Restricted Stock Units
Restricted stock units are nontransferable until vested and the holders are entitled to receive dividends with respect to the non-vested units. Prior to vesting, the grantees of restricted stock units are not entitled to vote the shares. Restricted stock unit awards vest in equal annual increments over the vesting period.
The following table summarizes restricted stock unit grants under the Plan during the nine months ended September 30, 2017:
| | | | | | | |
Grantee Type | | # of
Restricted Stock
Units Granted | | Vesting
Period | | Grant Date
Fair Value |
| | | | | | | |
Employee Group | | 876,123 | | 5 years | | $ | 8,340,691 |
All stock-based compensation cost is measured at the grant date, based on the estimated fair value of the award, and is recognized on a straight-line basis as expense over the employees’ requisite service period. Forfeitures will be recorded as a cumulative adjustment to stock-based compensation expense in the period forfeitures are incurred.
Stock Options
A summary of option activity under the Plan as of September 30, 2017 and changes during the nine months then ended are as follows:
| | | | | | | | | | |
| | Shares | | Weighted
Average
Exercise
Price | | Weighted
Average
Remaining
Contractual
Terms
(Years) | | Aggregate
Intrinsic
Value (in
thousands) |
| | | | | | | | | | |
Outstanding as of January 1, 2017 | | — | | $ | — | | — | | $ | — |
Granted | | 1,455,500 | | | 9.99 | | 10.0 | | | — |
Exercised | | — | | | — | | — | | | — |
Forfeited or expired | | (9,000) | | | 9.98 | | — | | | 20 |
Outstanding as of September 30, 2017 | | 1,446,500 | | | 9.99 | | 9.4 | | | 4,425 |
| | | | | | | | | | |
Exercisable as of September 30, 2017 | | — | | $ | — | | — | | $ | — |
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DASEKE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(Unaudited)
NOTE 12 – STOCK-BASED COMPENSATION – (Continued)
Restricted Stock Units
A summary of restricted stock unit awards activity under the Plan as of September 30, 2017 and changes during the nine months then ended are as follows:
| | | | | |
| | Units | | Weighted
Average Grant
Date Fair
Value
(Per Unit) |
| | | | | |
Outstanding as of January 1, 2017 | | — | | $ | — |
Granted | | 876,123 | | | 9.52 |
Vested | | — | | | — |
Forfeited | | (155,334) | | | 9.66 |
Outstanding as of September 30, 2017 | | 720,789 | | $ | 9.49 |
Aggregate stock-based compensation charges, net of forfeitures, were $0.7$2.2 million and $1.2$0.8 million duringfor the three and nine months ended SeptemberJune 30, 20172022 and included as a component of salaries, wages2021, respectively, and employee benefits on$6.4 million and $3.2 million for the accompanying consolidated statements of operations.six months ended June 30, 2022 and 2021, respectively. As of SeptemberJune 30, 2017,2022, there was $5.6$1.2 million, $5.1 million, and $10.0 million of unrecognized stock-based compensation expense related to stock options, whichrestricted stock units (RSUs) and performance stock units (PSUs) (both equity and liability awards), respectively. This expense will be recognized over athe weighted average periodperiods of 4.4 years.0.8 years for stock options, 1.6 years for RSUs and 1.3 years for PSUs.
NOTE 13 – DEFINED CONTRIBUTION PLANDuring the six months ended June 30, 2022, there were 203,821 RSUs awarded to participants that are classified as equity. In addition, during the six months ended June 30, 2022, there were 235,393 PSUs awarded to participants that are classified as liabilities. During the six months ended June 30, 2022, there were no stock options granted.
On January 1, 2015,Restricted Stock Units
The following table summarizes RSU grants under the Company establishedIncentive Plan:
| | | | | | | | | | | | | | |
Grantee Type | | # of
RSUs Granted | | | Issued and Outstanding | | | Vesting
Period | | Weighted Average Grant Date Fair Value (Per Unit) | |
Director Group | | | 830,978 | | | | 71,771 | | | 1-2 years | | $ | 11.21 | |
Employee Group | | | 2,393,066 | | | | 656,392 | | | 3-5 years | | $ | 9.36 | |
Total | | | | | | 728,163 | | | | | | |
A summary of RSU awards activity under the Daseke, Inc. 401(k) RetirementIncentive Plan (the Retirement Plan)as of June 30, 2022, and mergedthe changes during the six separate plans intomonths ended June 30, 2022 are as follows:
| | | | | | | | |
| | Units | | | Weighted
Average Grant
Date Fair Value
(Per Unit) | |
Non-vested as of January 1, 2022 | | | 673,830 | | | $ | 8.56 | |
Granted | | | 203,821 | | | | 12.16 | |
Vested | | | (137,640 | ) | | | 8.60 | |
Forfeited | | | (11,848 | ) | | | 9.76 | |
Non-vested as of June 30, 2022 | | | 728,163 | | | $ | 9.54 | |
The weighted average grant date fair value of RSUs granted during the Retirement Plan.six months ended June 30, 2022 and 2021 was $12.16 and $6.92, respectively. The Retirement Plan is a defined contribution plantotal fair value of RSUs vested during the six months ended June 30, 2022 and intended to qualify under ERISA provisions2021 was $1.2 million and $1.4 million, respectively.
13
Table of 401(k). Under the safe harbor matching requirements,Contents
Performance Stock Units
As of June 30, 2022, the Company had expenses3,100,571 PSUs outstanding, of $0.6 millionwhich 1,355,571 were classified as liabilities.
As of June 30, 2022, there were 630,571 PSUs classified as liabilities in which the vesting occurs upon the achievement of specific performance-based conditions related to the Company’s financial performance over a three-year period, modified based on the Company’s Relative Total Shareholder Return (TSR) and $0.5 millionsubject to final vesting based on the participant’s continued employment through the end of the requisite service periods. The ultimate amount to vest may be downwardly adjusted by the Compensation Committee of the Company’s Board of Directors if the TSR is negative. The amount of awards that will ultimately vest for these PSUs can range from 0% to 200% based on the three months ended September 30, 2017 and 2016 and $1.8 million and $1.7 million forTSR calculated over a three-year period beginning January 1 of the nine months ended September 30, 2017 and 2016, respectively. Matching contributions for 401(k) defined contribution plans not yet merged into the Retirement Plan totaled approximately $47,000 for both the three and nine months ended September 30, 2017.
NOTE 14 – INTEREST RATE SWAP
year each grant was made. The Company currently expects that these PSUs will vest between 95% and 128%. The fair value of these PSUs will be remeasured at each period-end until the earlier of the date they are reclassified to equity or the vesting date. The inputs and assumptions used to calculate the fair value ranged from timea remaining term of 1.50 to time, uses2.50 years, risk-free interest rate swapsof 2.11% to manage risks2.39%, the expected volatility of 58.2% to 89.3%, and the expected dividend yield of 0.0%.
In addition, there are 725,000 PSUs classified as liabilities in which the vesting occurs upon the achievement of specific performance-based conditions related to interest rate movements. These interest rate swapsthe Company’s financial performance over a two-year period, subject to various subjective individual performance goals and subject to final vesting based on the participant’s continued employment through the end of the requisite service periods. The fair value of these PSUs will be remeasured at each period-end until the earlier of the date they are reportedreclassified to equity or the vesting date. The Company currently expects that these PSUs will vest at 100%. The fair value is equal to the market value of the common stock at each period-end.
As of June 30, 2022, the total fair value of liability-classified awards was approximately $9.8 million, of which $3.3 million was recorded as a liability within other non-current liabilities on the consolidated balance sheets in accrued expenses and other liabilities.
The Company had an interest rate swap agreement which qualified for hedge accounting and accordingly was designated as a cash flow hedge. For this interest rate swap, the change in fair value on the effective portion of the hedge was recognized as a component of other comprehensive income. In conjunction with the Business Combination discussed in Note 2, this interest rate swap was terminated. At December 31, 2016, the fair value of this interest rate swap was a liability of $51,871.
The terms of the interest rate swap designated as a cash flow hedge at December 31, 2016 were as follows:
| | | | | | | | | | |
| | Notional | | Termination | | Interest Rate | | Interest Rate | |
Effective Date | | Amount | | Date | | Received | | Paid | |
11/12/2013 | | $ | 12,000,000 | | 4/30/2018 | | 0.6 | % | 3.63 | % |
sheet.
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DASEKE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(Unaudited)
NOTE 1510 – COMMITMENTS AND CONTINGENCIES
Operating Leases
The Company leases certain office building facilities, terminal locations and revenue equipment under non-cancelable operating leases. Building and terminal rent expense under operating leases was $2.1 million and $0.7 million for the three months ended September 30, 2017 and 2016, respectively, and $4.5 million and $2.0 million for the nine months ended September 30, 2017 and 2016, respectively. Tractor, trailer and other revenue equipment rent expense under operating leases was $4.7 million and $3.5 million for the three months ended September 30, 2017 and 2016, respectively, and $12.7 million and $9.2 million for the nine months ended September 30, 2017 and 2016, respectively.
Letters of Credit
The Company had outstanding letters of credit at Septemberas of June 30, 20172022 and December 31, 2021 totaling approximately $11.1$25.7 million, including those disclosed in Note 9.7. These letters of credit coverare related to liability and workers’ compensation insurance claims.
Contingencies
Contingencies
The Company is involved in certain claims and pending litigation arising in the normal course of business. These proceedings primarily involve claims for personal injury or property damage incurred in the transportation of freight or for personnel matters. The Company maintains liability insurance to cover liabilities arising from these matters but is responsible forto pay self-insurance and deductibles on such matters up to a certain threshold before the insurance is applied.
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NOTE 1611 – REPORTABLE SEGMENTS
The Company evaluates the performance of the segments primarily based on their respective revenues and operating income. Accordingly, interest expense and other non-operating items are not reported in segment results. In addition, theThe Company has disclosed a corporate segment, which is not an operating segment and includes acquisition transaction expenses, corporate salaries, interest expense and other corporate administrative expenses and intersegment eliminations. In addition, the corporate segment, from time to time when advantageous to do so, purchases and resells certain revenue equipment. During the three months ended June 30, 2022, the corporate segment purchased $2.1 million in revenue equipment, which it resold for $2.2 million. During the six months ended June 30, 2022, the corporate segment purchased $6.7 million in revenue equipment, which it resold for $7.1 million. This resulted in gains of $0.1 million and $0.4 million for the three and six months ended June 30, 2022 and was recognized within Gain on disposition of property and equipment on the consolidated statements of operations. During the three and six months ended June 30, 2021, the corporate segment did 0t purchase or resell any revenue equipment.
The corporate segment also leases certain revenue equipment to the Company’s operating segments. Such leases are generally billed at estimated market rates, and the intersegment expenses included within operating income (loss) are eliminated in the Company’s consolidated results. Intersegment lease expenses for the Specialized Solutions segment totaled $0.1 million for the three and six months ended June 30, 2022. There were 0 intersegment lease expenses for the Flatbed Solutions segment for the three and six months ended June 30, 2022. There were 0 intersegment lease expenses in any reportable segments for the three and six months ended June 30, 2021.
The Company’s operating segments also provide transportation and related services for one another. Such services are generally billed at cost, and no profit is earned. Such intersegment revenues and expenses are eliminated in the Company’s consolidated results. Intersegment transportation and related services revenues and expenses for the Flatbed Solutions segment totaled $0.7$1.0 million and $0.8$1.8 million for the three and six months ended SeptemberJune 30, 20172022, respectively. Intersegment transportation and 2016, respectively,related services revenues and $2.4expenses for the Flatbed Solutions segment totaled $0.9 million and $1.5$1.8 million for the ninethree and six months ended SeptemberJune 30, 20172021, respectively. Intersegment transportation and 2016, respectively.
Intersegmentrelated services revenues and expenses for the Specialized Solutions segment totaled $1.2$2.6 million and $0.5$4.5 million for the three and six months ended SeptemberJune 30, 20172022, respectively. Intersegment transportation and 2016, respectivelyrelated services revenues and $2.6expenses for the Specialized Solutions segment totaled $2.0 million and $2.0$4.3 million for the ninethree and six months ended SeptemberJune 30, 2017 and 2016.
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DASEKE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(Unaudited)
NOTE 16 – REPORTABLE SEGMENTS– (Continued)
The following tables reflect certain financial data of the Company’s reportable segments for the three and ninesix months ended SeptemberJune 30, 20172022 and 20162021 (in thousands)millions):
| | | | | | | | | | | | |
| | Flatbed | | Specialized | | | | | | |
| | Solutions | | Solutions | | Corporate/ | | Consolidated |
| | Segment | | Segment | | Eliminations | | Total |
Three Months Ended September 30, 2017 | | | | | | | | | | | | |
Total revenue | | $ | 85,592 | | $ | 147,631 | | $ | (1,901) | | $ | 231,322 |
Operating income | | | 4,755 | | | 7,159 | | | (6,210) | | | 5,704 |
Depreciation | | | 6,713 | | | 11,290 | | | 37 | | | 18,040 |
Amortization of intangible assets | | | 437 | | | 1,328 | | | — | | | 1,765 |
Income (loss) before income tax | | | 2,997 | | | 5,060 | | | (10,869) | | | (2,812) |
Total assets | | | 272,686 | | | 472,761 | | | 111,974 | | | 857,421 |
| | | | | | | | | | | | |
Three Months Ended September 30, 2016 | | | | | | | | | | | | |
Total revenue | | $ | 78,975 | | $ | 96,534 | | $ | (1,361) | | $ | 174,148 |
Operating income | | | 3,794 | | | 5,739 | | | (3,451) | | | 6,082 |
Depreciation | | | 7,161 | | | 8,303 | | | 40 | | | 15,504 |
Amortization of intangible assets | | | 489 | | | 1,005 | | | — | | | 1,494 |
Income (loss) before income tax | | | 1,708 | | | 3,917 | | | (6,199) | | | (574) |
Total assets | | | 295,286 | | | 304,623 | | | 8,946 | | | 608,855 |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | Flatbed | | Specialized | | | | | | |
| | Solutions | | Solutions | | Corporate/ | | Consolidated |
| | Segment | | Segment | | Eliminations | | Total |
Nine Months Ended September 30, 2017 | | | | | | | | | | | | |
Total revenue | | $ | 253,794 | | $ | 340,289 | | $ | (5,004) | | $ | 589,079 |
Operating income | | | 14,955 | | | 12,756 | | | (18,391) | | | 9,320 |
Depreciation | | | 20,619 | | | 28,375 | | | 115 | | | 49,109 |
Amortization of intangible assets | | | 1,310 | | | 3,339 | | | — | | | 4,649 |
Income (loss) before income tax | | | 9,725 | | | 7,004 | | | (31,979) | | | (15,250) |
| | | | | | | | | | | | |
Nine Months Ended September 30, 2016 | | | | | | | | | | | | |
Total revenue | | $ | 237,169 | | $ | 267,651 | | $ | (3,434) | | $ | 501,386 |
Operating income | | | 14,041 | | | 14,689 | | | (12,394) | | | 16,336 |
Depreciation | | | 21,219 | | | 24,637 | | | 117 | | | 45,973 |
Amortization of intangible assets | | | 1,468 | | | 3,074 | | | — | | | 4,542 |
Income (loss) before income tax | | | 9,517 | | | 9,907 | | | (20,303) | | | (879) |
| | | | | | | | | | | | | | | | |
| | Flatbed | | | Specialized | | | Corporate/ | | | Consolidated | |
| | Solutions Segment | | | Solutions Segment | | | Eliminations | | | Total | |
Three Months Ended June 30, 2022 | | | | | | | | | | | | |
Total revenue | | $ | 216.0 | | | $ | 268.6 | | | $ | (3.3 | ) | | $ | 481.3 | |
Company freight | | | 42.9 | | | | 127.5 | | | | (2.6 | ) | | | 167.8 | |
Owner operator freight | | | 90.2 | | | | 48.2 | | | | (0.5 | ) | | | 137.9 | |
Brokerage | | | 47.6 | | | | 44.2 | | | | 0.1 | | | | 91.9 | |
Logistics | | | 1.1 | | | | 12.9 | | | | 0 | | | | 14.0 | |
Fuel surcharge | | | 34.2 | | | | 35.8 | | | | (0.3 | ) | | | 69.7 | |
Operating income (loss) | | | 24.6 | | | | 22.7 | | | | (14.5 | ) | | | 32.8 | |
Depreciation | | | 8.6 | | | | 11.9 | | | | 0.5 | | | | 21.0 | |
Amortization of intangible assets | | | 0.8 | | | | 0.9 | | | | 0 | | | | 1.7 | |
Restructuring | | | 0 | | | | 0.4 | | | | 0.2 | | | | 0.6 | |
Non-cash operating lease expense | | | (0.1 | ) | | | 0 | | | | 0 | | | | (0.1 | ) |
Interest expense | | | 0.8 | | | | 1.3 | | | | 5.4 | | | | 7.5 | |
Capital expenditures | | | 17.1 | | | | 20.0 | | | | 13.3 | | | | 50.4 | |
| | | | | | | | | | | | |
Three Months Ended June 30, 2021 | | | | | | | | | | | | |
Total revenue | | $ | 180.9 | | | $ | 226.1 | | | $ | (3.0 | ) | | $ | 404.0 | |
Company freight | | | 47.7 | | | | 118.3 | | | | (2.4 | ) | | | 163.6 | |
Owner operator freight | | | 88.9 | | | | 40.7 | | | | (0.5 | ) | | | 129.1 | |
Brokerage | | | 25.3 | | | | 41.5 | | | | (0.1 | ) | | | 66.7 | |
Logistics | | | 1.3 | | | | 9.3 | | | | 0 | | | | 10.7 | |
Fuel surcharge | | | 17.7 | | | | 16.3 | | | | (0.1 | ) | | | 33.9 | |
Operating income (loss) | | | 22.9 | | | | 29.0 | | | | (6.6 | ) | | | 45.3 | |
Depreciation | | | 8.1 | | | | 12.1 | | | | 0.2 | | | | 20.4 | |
Amortization of intangible assets | | | 0.8 | | | | 1.0 | | | | 0 | | | | 1.8 | |
Restructuring | | | 0 | | | | 0.1 | | | | 0 | | | | 0.1 | |
Non-cash operating lease expense | | | (0.1 | ) | | | (0.3 | ) | | | 0 | | | | (0.4 | ) |
Interest expense | | | 0.9 | | | | 1.3 | | | | 5.4 | | | | 7.6 | |
Capital expenditures | | | 7.7 | | | | 13.5 | | | | 6.4 | | | | 27.6 | |
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| | | | | | | | | | | | | | | | |
| | Flatbed | | | Specialized | | | Corporate/ | | | Consolidated | |
| | Solutions Segment | | | Solutions Segment | | | Eliminations | | | Total | |
Six Months Ended June 30, 2022 | | | | | | | | | | | | |
Total revenue | | $ | 411.1 | | | $ | 497.1 | | | $ | (5.9 | ) | | $ | 902.3 | |
Company freight | | | 84.4 | | | | 244.0 | | | | (4.6 | ) | | | 323.8 | |
Owner operator freight | | | 178.3 | | | | 90.3 | | | | (0.9 | ) | | | 267.7 | |
Brokerage | | | 88.8 | | | | 81.3 | | | | 0 | | | | 170.1 | |
Logistics | | | 2.0 | | | | 23.4 | | | | 0 | | | | 25.4 | |
Fuel surcharge | | | 57.6 | | | | 58.1 | | | | (0.4 | ) | | | 115.3 | |
Operating income (loss) | | | 40.5 | | | | 40.3 | | | | (29.8 | ) | | | 51.0 | |
Depreciation | | | 16.9 | | | | 23.3 | | | | 0.7 | | | | 40.9 | |
Amortization of intangible assets | | | 1.5 | | | | 1.9 | | | | 0 | | | | 3.4 | |
Restructuring | | | 0 | | | | 0.5 | | | | 0.7 | | | | 1.2 | |
Non-cash operating lease expense | | | (0.1 | ) | | | 0 | | | | 0 | | | | (0.1 | ) |
Interest expense | | | 1.6 | | | | 2.5 | | | | 10.5 | | | | 14.6 | |
Capital expenditures | | | 20.4 | | | | 27.9 | | | | 18.2 | | | | 66.5 | |
| | | | | | | | | | | | |
Six Months Ended June 30, 2021 | | | | | | | | | | | | |
Total revenue | | $ | 334.4 | | | $ | 409.8 | | | $ | (6.3 | ) | | $ | 737.9 | |
Company freight | | | 92.4 | | | | 221.1 | | | | (4.8 | ) | | | 308.7 | |
Owner operator freight | | | 159.9 | | | | 75.3 | | | | (1.0 | ) | | | 234.2 | |
Brokerage | | | 47.5 | | | | 68.1 | | | | (0.4 | ) | | | 115.2 | |
Logistics | | | 2.5 | | | | 16.5 | | | | 0.2 | | | | 19.2 | |
Fuel surcharge | | | 32.1 | | | | 28.8 | | | | (0.3 | ) | | | 60.6 | |
Operating income (loss) | | | 33.9 | | | | 39.5 | | | | (20.0 | ) | | | 53.4 | |
Depreciation | | | 16.1 | | | | 24.2 | | | | 0.6 | | | | 40.9 | |
Amortization of intangible assets | | | 1.5 | | | | 2.0 | | | | 0 | | | | 3.5 | |
Restructuring | | | 0 | | | | 0.1 | | | | 0 | | | | 0.1 | |
Non-cash operating lease expense | | | (0.2 | ) | | | (0.6 | ) | | | 0 | | | | (0.8 | ) |
Interest expense | | | 2.6 | | | | 3.4 | | | | 12.7 | | | | 18.7 | |
Capital expenditures | | | 16.7 | | | | 24.1 | | | | 6.4 | | | | 47.2 | |
A measure of assets is not applicable, as segment assets are not regularly reviewed by the chief operating decision maker for evaluating performance or allocating resources.
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NOTE 12 – EARNINGS (LOSS) PER SHARE
Unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and are included in the computation of earnings per share pursuant to the two-class method. The Company’s outstanding non-vested RSUs are participating securities unless there is a net loss attributable to common stockholders. Accordingly, earnings per common share are computed using the two-class method.
Basic earnings per common share is calculated by dividing net income available to common stockholders by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share reflect the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the Company’s earnings.
For the six months ended June 30, 2021, shares of the Company’s 7.625% Series A Convertible Cumulative Preferred Stock (Series A Preferred Stock) were not included in the computation of diluted earnings (loss) per share as their effects were anti-dilutive.
The following table sets forth the computation of basic and diluted earnings per share under the two-class method:
| | | | | | | | | | | | | | | | |
| | Three Months Ended | | | Six Months Ended | |
| | June 30, | | | June 30, | |
(in millions, except per share data) | | 2022 | | | 2021 | | | 2022 | | | 2021 | |
| | | | | | | | | | | | |
Numerator: | | | | | | | | | | | | |
Net income | | $ | 17.7 | | | $ | 35.3 | | | $ | 30.7 | | | $ | 28.0 | |
Less Series A Preferred Stock dividends | | | (1.2 | ) | | | (1.3 | ) | | | (2.5 | ) | | | (2.5 | ) |
Net income attributable to common stockholders | | | 16.5 | | | | 34.0 | | | | 28.2 | | | | 25.5 | |
Allocation of earnings to non-vested participating RSUs | | | (0.2 | ) | | | (0.3 | ) | | | (0.3 | ) | | | (0.2 | ) |
Numerator for basic EPS - income available to common stockholders - two class method | | $ | 16.3 | | | $ | 33.7 | | | $ | 27.9 | | | $ | 25.3 | |
| | | | | | | | | | | | |
Effect of dilutive securities: | | | | | | | | | | | | |
Add back Series A Preferred Stock dividends | | $ | 1.2 | | | $ | 1.3 | | | $ | 2.5 | | | $ | 0 | |
Add back allocation earnings to participating securities | | | 0.2 | | | | 0.3 | | | | 0.3 | | | | 0.2 | |
Reallocation of earnings to participating securities considering potentially dilutive securities | | | (0.2 | ) | | | (0.3 | ) | | | (0.3 | ) | | | (0.2 | ) |
Numerator for diluted EPS - income available to common shareholders - two class method | | $ | 17.5 | | | $ | 35.0 | | | $ | 30.4 | | | $ | 25.3 | |
| | | | | | | | | | | | |
Denominator: | | | | | | | | | | | | |
Denominator for basic EPS - weighted-average shares | | | 63,470,040 | | | | 64,842,620 | | | | 63,182,277 | | | | 64,960,833 | |
| | | | | | | | | | | | |
Effect of dilutive securities: | | | | | | | | | | | | |
Stock options and PSUs | | | 2,432,826 | | | | 1,371,510 | | | | 2,484,663 | | | | 1,193,738 | |
Series A Preferred Stock | | | 5,652,173 | | | | 5,652,173 | | | | 5,652,173 | | | | 0 | |
Denominator for diluted EPS - weighted-average shares | | | 71,555,039 | | | | 71,866,303 | | | | 71,319,113 | | | | 66,154,571 | |
| | | | | | | | | | | | |
Basic earnings per share | | $ | 0.26 | | | $ | 0.52 | | | $ | 0.44 | | | $ | 0.39 | |
Diluted earnings per share | | $ | 0.24 | | | $ | 0.49 | | | $ | 0.43 | | | $ | 0.38 | |
NOTE 1713 – SUBSEQUENT EVENTS
On October 17, 2017Subsequent to June 30, 2022, the Company’s board of directors declared a quarterly dividend of $1.91 per share on 650,000 shares of Series A Preferred Stock outstanding as of August 15, 2017, or $1.2 million,Company completed one additional integration under the Transformation Plan, which was paid on October 20, 2017.
reduced our operating segments from 10 to 9.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Overview
Overview
Daseke Inc. is a leading providerpremier North American transportation solutions specialist dedicated to servicing challenging industrial end-markets through experienced people and consolidatora fleet of more than 4,500 tractors and 11,000 flatbed and specialized trailers, and has operations throughout the United States, Canada and Mexico. The Company also provides logistical planning and warehousing services to customers.
The Company believes it provides one of the most comprehensive transportation and logistics solutions offerings in the industry. The Company delivers its diverse offering of transportation and logistics solutions focused exclusively on open deck freight in North America. The transportation and logistics market is oneto thousands of the largest industries in the United States. The open deck freight market represented an approximately $133 billion subset of the broader transportation and logistics market in 2016. The U.S. open deck freight market is expected to grow to approximately $150 billion in 2017-2018 and to approximately $174 billion in 2019.
The Company believes it is the largest owner of open deck equipment and the second largest provider of flatbed, open deck transportation and logistics solutions by revenue in North America. The Company delivers a comprehensive and diverse offering of flatbed and specialized transportation and logistics solutions to approximately 4,800 customers across the continental United States, Canada and Mexico through two reportable segments: Flatbed Solutions and Specialized Solutions. The Flatbed Solutions segment focuses on delivering transportation and logistics solutions that principally require the use of flatbed and retractable-sided transportation equipment, and the Specialized Solutions segment focuses on delivering transportation and logistics solutions that principally include super heavy haul, high-value customized, over-dimensional, step deck and removable gooseneck trailer solutions.require the use of specialized trailering transportation equipment.
Both of the Company’s reportable segments operate highly flexible business models comprised of company-owned tractors and trailers and asset-light operations (which consist of owner-operatorowner operator transportation, freight brokerage and freight brokerage)logistics). The Company’s asset-based operations have the benefit of providing shippers with certainty of deliverycommitted capacity and continuity of operations.operations to meet shippers needs. Alternatively, the Company’s asset-light operations offer flexibility and scalability to meet customers’ dynamic needs and have lower capital expenditure requirements and fixed costs. Approximately 62.0% of freight, logistics
Recent Developments
Thus far in 2022, like others in our industry, we have experienced inflationary cost headwinds in driver pay, operations and brokerage revenue formaintenance, and insurance expenses. The U.S. inflation rate is the nine months ended September 30, 2017 was derived from company-owned equipment and approximately 38.0% was derived from asset-light services.
Business Combination and Other Recent Developments
On February 27, 2017, Hennessy consummated the merger of Hennessy’s wholly-owned subsidiary with and into Private Daseke, with Private Daseke surviving as a direct wholly-owned subsidiary of Hennessy. The aggregate consideration received by Private Daseke stockholders upon closing was $266.7 million, consisting of newly issued shares of common stock at a value of $10.00 per share. The Merger Agreement containshighest experienced in four decades. Inflation can have an earn-out provision through which Private Daseke stockholders could receive up to 15 million additional shares of common stock (with up to 5 million shares payable annually with respect to 2017, 2018 and 2019 performance). See Note 2 of Notes to Consolidated Financial Statements for more information regarding the Business Combination.
On May 1, 2017, the Company completed mergers with two leading open-deck specialized transportation companies: the Schilli Companies (Schilli), headquartered in Remington, Indiana, and Big Freight Systems Inc. (Big Freight), headquartered in Steinbach, Manitoba. On July 1, 2017, the Company completed a merger with The Steelman Companies (Steelman), headquartered in Springfield, Missouri. On September 1, 2017, the Company completed a merger with R&R Trucking Holdings, LLC (R&R), based in Duenweg, Missouri.
How The Company Evaluates Its Operations
The Company uses a number of primary indicators to monitor its revenue and expense performance and efficiency, including Adjusted EBITDA, Adjusted EBITDAR, free cash flow and adjusted operating ratio, and its key drivers of revenue quality, growth, expense control and operating efficiency. Adjusted EBITDA, Adjusted EBITDAR, free cash flow and adjusted operating ratio are not recognized measures under GAAP and should not be considered alternatives to, or more meaningful than, net income (loss), cash flows from operating activities, operating income, operating ratio, operating margin or any other measure derived in accordance with GAAP. See “Non-GAAP Financial Measures” for more informationimpact on the Company’s useoperating costs. A prolonged period of these non-GAAP measures, as well as a description of the computation and reconciliation of the Company’s Adjusted EBITDA, Adjusted EBITDAR and free cash flow to net income (loss) and adjusted operating ratio to operating ratio.
Revenue
The Company records four types of revenue: freight, brokerage, logistics andinflation could cause interest rates, fuel, surcharge. Freight revenue is generated by hauling freight for the Company’s customers using its trucks or its owner-operators’ equipment. Generally, the Company’s customers pay for its services based on the number of miles in the most direct route between pick-up and delivery locationswages and other ancillary services the Company provides. Freight revenue is the product of the number of revenue-generating miles driven and the rate per mile the Company receives from customers plus accessorial charges, such as loading and unloading freight for its customers, cargo protection, fees for detaining its equipment or fees for route planning and supervision. Freight revenue is affected by fluctuations in North American economic activity as well as changes in specific customer demand, the level of capacity in the industry and driver availability.
The Company’s brokerage revenue is generated primarily by its use of third-party carriers when it needs capacitycosts to move its customers’ loads. The main factor that affects brokerage revenue is the availability of the Company’s drivers and owner-operators (and hence the need for third-party carriers) and the rate for the load. Brokerage revenue is also affected by fluctuations in North American economic activity as well as changes in the level of capacity in the industry and driver availability.
Logistics revenue is generated from a range of services, including vehicle maintenance and repair, fuel management services, value-added warehousing and packaging, and other fleet management solutions. Logistics revenue is primarily driven by specific customer requirements for additional services and may fluctuate depending on customers’ utilization of these services due to changes in cargo specifications, delivery staging and fluctuations in the North American economic activity. The Company began recording logistics revenue as a result of the Recent Acquisitions.
Fuel surcharges are designed to compensate the Company for fuel costs above a certain cost per gallon base. Generally, the Company receives fuel surcharges on the miles forincrease, which it is compensated by customers. However, the Company continues to have exposure to increasing fuel costs related to empty miles, fuel efficiency due to engine idle time and other factors and to the extent the surcharge paid by the customer is insufficient. The main factors thatwould adversely affect fuel surcharge revenue are the price of diesel fuel and the number of loaded miles. In general, a declining energy and fuel price environment, such as in 2015 and most of 2016, negatively affects the Company’s fuel surcharge revenues, and conversely, an environment with rising fuel and energy prices benefits its fuel surcharge revenues. Although the Company’s surcharge programs vary by customer, they typically involve a computation based on the change in national or regional fuel prices. The Company’s fuel surcharges are billed on a lagging basis, meaning it typically bills customers in the current week based on a previous week’s applicable index. Therefore, in times of increasing fuel prices, the Company does not recover as much as it is currently paying for fuel. In periods of declining prices, the opposite is true. Also, its fuel surcharge programs typically require a specified minimum change in fuel cost to prompt a change in fuel surcharge revenue. Therefore, many of these programs have a time lag between when fuel costs change and when the change is reflected in fuel surcharge revenue.
Expenses
The Company’s most significant expenses vary with miles traveled and include driver wages, services purchased from owner-operators and other transportation providers (which are recorded on the “Purchased freight” line of the Company’s consolidated statements of operations) and fuel. Although driver-related expenses vary with miles traveled, the Company currently expects that its expenses relating to driver wages, as a percentage of operating revenues, will increase in the near-term, with or without changes in total miles, due to expected increases in average driver wages paid per mile in the general trucking industry. The expected increases in driver wages per mile are due to current market conditions caused by a lack of qualified drivers in the industry.
Maintenance and tire expenses and cost of insurance and claims generally vary with the miles the Company travels but also have a controllable component based on safety improvements, fleet age, efficiency and other factors. The Company’s primary fixed costs are depreciation of long-term assets (such as tractors, trailers and terminals), interest expense, rent and non-driver compensation.
The Company’s fuel surcharge programs help to offset increases in fuel prices but typically do not offset empty miles, idle time and out of route miles driven. As discussed above under “Revenue,” its fuel surcharge programs have a time lag between when fuel costs change and when the change is reflected in fuel surcharge revenue. Due to this time lag, the Company’s fuel expense, net of fuel surcharge, negatively impacts its operating income during periods of sharply rising fuel costs and positively impacts its operating income during periods of falling fuel costs. In general, due to the fuel surcharge programs, its operating income is less negatively affected by an environment with higher, stable fuel prices than an environment with lower fuel prices. In addition to its fuel surcharge programs, the Company believes the most effective protection against fuel cost increases is to maintain a fuel-efficient fleet by incorporating fuel efficiency measures. Also, the Company has arrangements with some of its significant fuel suppliers to buy the majority of its fuel at contracted pricing schedules that fluctuate with the market price of diesel fuel. The Company has not used derivatives as a hedge against higher fuel costs in the past but continues to evaluate this possibility.
Factors Affecting the Comparability of the Company’s Financial Results
Acquisitions
The Company has a long history of and intends to continue to acquire appropriate flatbed and specialized trucking companies. Negotiations and discussions with potential target companies are an integral part of the Company’s operations. These negotiations and discussions can be
in varying stages from infancy to very mature. Therefore, investors in Daseke’s stock should assume the Company is always evaluating, negotiating and performing diligence on potential acquisitions.
The comparability of the Company’s results of operations among the periods presented is impactedunless freight rates correspondingly increase. We continue to see strong freight rates, which have been supported by the acquisitions listed below, which were completedour strategic alignment with niche end-markets in the industrial economy, as opposed to the commodity-oriented consumer retail markets. Strong freight rates, along with our increases in fuel surcharges, have helped to partially offset these inflationary cost headwinds.
In addition to inflation, like others in our industry, we have observed ongoing delays in receiving new equipment as the supply chain disruptions persisted throughout the first half of 2022. However, we are expecting to see an improvement in receiving new equipment during the second half of 2022.
During the first quarter of 2022, the Company internally announced a phased integration and third quartersrestructuring plan, with the first phase integrating five operating segments into three other operating segments, which will reduce the number of 2017. Also, as a resultoverall operating segments from eleven to six. The second phase of the below acquisitions,Plan will integrate those six operating segments into four or five operating segments. The Plan is intended to reduce the Company’s historical resultscost base, right size its organization and management team and increase and accelerate its previously announced operational improvement goals. In addition, the Company anticipates additional revenue opportunities driven by synergies from optimizing a consolidated operation, including empty mile reduction, pricing improvements, and additional seated truck contribution. The Company has completed two integrations under the Plan, which has reduced our operating segments from eleven to nine. During the second quarter of operations may not be comparable or indicative2022, the Company determined there was no fair value associated with one of future results.these integrated operating segments goodwill and intangible assets, which was within the Specialized Solutions segment, and recorded an impairment charge of $7.8 million in the Specialized Solutions segment.
18
| ·
| | Schilli Acquisition – Effective as of May 1, 2017, the Company acquired all of the outstanding stock of Schilli to expand its presence in the Midwestern U.S. Schilli is part of the Company’s Specialized Solutions segment.
|
| ·
| | Big Freight Acquisition – Effective as of May 1, 2017, the Company acquired all of the outstanding stock of Big Freight to expand its presence into Canada and the power sports industry. Big Freight is part of the Company’s Specialized Solutions segment.
|
| ·
| | Steelman Acquisition – Effective as of July 1, 2017, the Company acquired all of the outstanding stock of Steelman to expand its presence in the Midwest and in both the power sports and heavy haul industries. Steelman is part of the Company’s Specialized Solutions segment.
|
| ·
| | R&R Acquisition – Effective as of September 1, 2017, the Company acquired all of the outstanding stock of R&R to expand the Company’s capabilities to include government and commercial arms, ammunition and explosives. R&R is part of the Company’s Specialized Solutions segment.
|
The Schilli, Big Freight, Steelman and R&R Acquisitions are collectively referred to as the Recent Acquisitions.
The Business Combination
The Company’s historical results of operations may not be comparable or indicative of results after the consummation of the Business Combination as a result of the following:
| ·
| | Decreased Leverage. As of December 31, 2016, after giving pro forma effect to the Business Combination, the Company would have had approximately $295.0 million of outstanding total indebtedness compared to the actual outstanding total indebtedness of $338.5 million, in each case, prior to debt issuance costs. For the year ended December 31, 2016, the Company’s pro forma interest expense would have been approximately $3.4 million lower than its historical interest expense.
|
| ·
| | Public Company Expenses. The Company incurred, and will continue to incur, direct, incremental general and administrative expenses as a result of being a publicly traded company, including, but not limited to, costs associated with annual and quarterly reports to stockholders, tax return preparation, independent auditor fees, investor relations activities, registrar and transfer agent fees, incremental director and officer liability insurance costs and independent director compensation. These direct, incremental general and administrative expenses, which the Company’s management estimates will total approximately $0.5 million annually, are not included in the Company’s historical financial results of operations.
|
| ·
| | Transaction Costs. During the nine months ended September 30, 2017, the Company expensed $2.0 million of transaction costs related to the Business Combination, compared to $0.3 million for the same period in 2016.
|
| ·
| | Deferred Financing Fees. During the first quarter of 2017, the Company expensed $3.9 million of unamortized deferred financing fees associated with debt refinanced in conjunction with the Business Combination. There were no such expenses for the nine months ended September 30, 2016.
|
Results of Operations
The following table sets forth itemsrevenue, operating expenses and income from operations (in dollars and as a percentage of total revenue), derived from the Company’s consolidated statements of operations, for the three months ended SeptemberJune 30, 20172022 and 20162021, as well as certain operating statistics for the same periods. In addition, the absolute and relative changes for each are presented. Rate per mile is the period’s revenue less fuel surcharge, brokerage and logistics revenues divided by total number of company and owner operator miles driven in the period. Miles are estimated based on information received as of the filing date and may change quarter to quarter when final information is received from each operating segment. Revenue per tractor is the period’s revenue less fuel surcharge, brokerage and logistics revenues divided by the average number of tractors in the period, including owner operator tractors.
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended June 30, | | | | | | | |
| | 2022 | | 2021 | | Increase (Decrease) |
(Dollars in millions, except Rate per mile and Revenue per tractor) | | Amount | | | % | | Amount | | | % | | Absolute | | | Relative |
REVENUE: | | | | | | | | | | | | | | | | | | | | | |
Company freight | | $ | 167.8 | | | | 34.9 | | % | | $ | 163.6 | | | | 40.5 | | % | | $ | 4.2 | | | | 2.6 | | % |
Owner operator freight | | | 137.9 | | | | 28.7 | | | | | 129.1 | | | | 32.0 | | | | | 8.8 | | | | 6.8 | | |
Brokerage | | | 91.9 | | | | 19.1 | | | | | 66.7 | | | | 16.5 | | | | | 25.2 | | | | 37.8 | | |
Logistics | | | 14.0 | | | | 2.9 | | | | | 10.7 | | | | 2.6 | | | | | 3.3 | | | | 30.8 | | |
Fuel surcharge | | | 69.7 | | | | 14.4 | | | | | 33.9 | | | | 8.5 | | | | | 35.8 | | | | 105.6 | | |
Total revenue | | $ | 481.3 | | | | 100.0 | | % | | $ | 404.0 | | | | 100.0 | | % | | $ | 77.3 | | | | 19.1 | | % |
| | | | | | | | | | | | | | | | | | | | | |
OPERATING EXPENSES: | | | | | | | | | | | | | | | | | | | | | |
Salaries, wages and employee benefits | | $ | 97.2 | | | | 20.2 | | % | | $ | 93.4 | | | | 23.1 | | % | | $ | 3.8 | | | | 4.1 | | % |
Fuel | | | 45.3 | | | | 9.4 | | | | | 27.0 | | | | 6.7 | | | | | 18.3 | | | | 67.8 | | |
Operations and maintenance | | | 40.1 | | | | 8.3 | | | | | 37.3 | | | | 9.2 | | | | | 2.8 | | | | 7.5 | | |
Communications | | | 1.0 | | | | 0.2 | | | | | 1.1 | | | | 0.3 | | | | | (0.1 | ) | | | (9.1 | ) | |
Purchased freight | | | 197.0 | | | | 40.9 | | | | | 155.3 | | | | 38.4 | | | | | 41.7 | | | | 26.9 | | |
Administrative | | | 17.1 | | | | 3.6 | | | | | 12.7 | | | | 3.1 | | | | | 4.4 | | | | 34.6 | | |
Sales and marketing | | | 0.6 | | | | 0.1 | | | | | 0.5 | | | | 0.1 | | | | | 0.1 | | | | 20.0 | | |
Taxes and licenses | | | 4.1 | | | | 0.9 | | | | | 3.8 | | | | 0.9 | | | | | 0.3 | | | | 7.9 | | |
Insurance and claims | | | 17.6 | | | | 3.7 | | | | | 9.9 | | | | 2.5 | | | | | 7.7 | | | | 77.8 | | |
Acquisition-related transaction expenses | | | 1.9 | | | | 0.4 | | | | | — | | | | — | | | | | 1.9 | | | | 100.0 | | |
Depreciation and amortization | | | 22.7 | | | | 4.7 | | | | | 22.2 | | | | 5.5 | | | | | 0.5 | | | | 2.3 | | |
Gain on disposition of revenue property and equipment | | | (4.5 | ) | | | (0.8 | ) | | | | (4.6 | ) | | | (1.1 | ) | | | | 0.1 | | | | (2.2 | ) | |
Impairment | | | 7.8 | | | | 1.7 | | | | | — | | | | — | | | | | 7.8 | | | | 100.0 | | |
Restructuring charges | | | 0.6 | | | | 0.1 | | | | | 0.1 | | | | — | | | | | 0.5 | | | | 500.0 | | |
Total operating expenses | | $ | 448.5 | | | | 93.2 | | % | | $ | 358.7 | | | | 88.8 | | % | | $ | 89.8 | | | | 25.0 | | % |
| | | | | | | | | | | | | | | | | | | | | |
INCOME FROM OPERATIONS | | $ | 32.8 | | | | 6.8 | | % | | $ | 45.3 | | | | 11.2 | | % | | $ | (12.5 | ) | | | (27.6 | ) | % |
| | | | | | | | | | | | | | | | | | | | | |
Other expense (income): | | | | | | | | | | | | | | | | | | | | | |
Interest income | | $ | (0.7 | ) | | | (0.1 | ) | % | | $ | (0.1 | ) | | | — | | % | | $ | (0.6 | ) | | | 600.0 | | % |
Interest expense | | | 7.5 | | | | 1.6 | | | | | 7.6 | | | | 1.9 | | | | | (0.1 | ) | | | (1.3 | ) | |
Change in fair value of warrant liability | | | — | | | | — | | | | | (7.8 | ) | | | (1.9 | ) | | | | 7.8 | | | | (100.0 | ) | |
Other | | | 0.6 | | | | 0.1 | | | | | (0.4 | ) | | | (0.1 | ) | | | | 1.0 | | | | (250.0 | ) | |
Total other expense (income) | | $ | 7.4 | | | | 1.5 | | % | | $ | (0.7 | ) | | | (0.2 | ) | % | | $ | 8.1 | | | | (1,157.1 | ) | % |
| | | | | | | | | | | | | | | | | | | | | |
Income before income taxes | | $ | 25.4 | | | | 5.3 | | % | | $ | 46.0 | | | | 11.4 | | % | | $ | (20.6 | ) | | | (44.8 | ) | % |
Income tax expense | | | 7.7 | | | | 1.6 | | | | | 10.7 | | | | 2.6 | | | | | (3.0 | ) | | | (28.0 | ) | |
Net income | | $ | 17.7 | | | | 3.7 | | % | | $ | 35.3 | | | | 8.7 | | % | | $ | (17.6 | ) | | | (49.9 | ) | % |
| | | | | | | | | | | | | | | | | | | | | |
OPERATING STATISTICS: | | | | | | | | | | | | | | | | | | | | | |
Company miles | | | 53.6 | | | | | | | | 57.7 | | | | | | | | (4.1 | ) | | | (7.1 | ) | % |
Owner operator miles | | | 43.8 | | | | | | | | 47.9 | | | | | | | | (4.1 | ) | | | (8.6 | ) | |
Total miles (in millions) | | | 97.4 | | | | | | | | 105.6 | | | | | | | | (8.2 | ) | | | (7.8 | ) | % |
| | | | | | | | | | | | | | | | | | | | | |
Rate per mile | | $ | 3.14 | | | | | | | $ | 2.77 | | | | | | | $ | 0.37 | | | | 13.4 | | % |
Revenue per tractor | | $ | 65,800 | | | | | | | $ | 60,400 | | | | | | | $ | 5,400 | | | | 8.9 | | % |
| | | | | | | | | | | | | | | | | | | | | |
Company owned tractors, at quarter-end | | | 2,652 | | | | | | | | 2,715 | | | | | | | | (63 | ) | | | (2.3 | ) | % |
Owner operator tractors, at quarter-end | | | 2,038 | | | | | | | | 2,112 | | | | | | | | (74 | ) | | | (3.5 | ) | |
Number of trailers, at quarter-end | | | 11,050 | | | | | | | | 11,266 | | | | | | | | (216 | ) | | | (1.9 | ) | % |
| | | | | | | | | | | | | | | | | | | | | |
Company owned tractors, average for the quarter | | | 2,610 | | | | | | | | 2,723 | | | | | | | | (113 | ) | | | (4.1 | ) | % |
Owner operator tractors, average for the quarter | | | 2,039 | | | | | | | | 2,123 | | | | | | | | (84 | ) | | | (4.0 | ) | |
Total tractors, average for the quarter | | | 4,649 | | | | | | | | 4,846 | | | | | | | | (197 | ) | | | (4.1 | ) | % |
19
Table of Contents
The following table sets forth revenue, operating expenses and income from operations (in dollars and as a percentage of total revenue) of the Company’s Specialized Solutions segment for the three months ended June 30, 2022 and 2021, as well as certain operating statistics for the same periods. In addition, the absolute and relative changes for each are presented. Rate per mile is the period’s revenue less fuel surcharge, brokerage and the increase or decreaselogistics revenues divided by total number of company and owner operator miles driven in the dollar amountsperiod. Miles are estimated based on information received as of those items.the filing date and may change quarter to quarter when final information is received from each operating segment. Revenue per tractor is the period’s revenue less fuel surcharge, brokerage and logistics revenues divided by the average number of tractors in the period, including owner operator tractors.
| | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | | | | |
| | 2017 | | 2016 | | Increase (Decrease) |
(Dollars in thousands) | | $ | | % | | $ | | % | | $ | | % |
| | | | | | | | | | | | | | | |
REVENUE: | | | | | | | | | | | | | | | |
Freight | | $ | 171,245 | | 74.0 | | $ | 135,415 | | 77.8 | | $ | 35,830 | | 26.5 |
Brokerage | | | 34,198 | | 14.8 | | | 25,977 | | 14.9 | | | 8,221 | | 31.6 |
Logistics | | | 7,871 | | 3.4 | | | — | | * | | | 7,871 | | * |
Fuel surcharge | | | 18,008 | | 7.8 | | | 12,756 | | 7.3 | | | 5,252 | | 41.2 |
Total revenue | | | 231,322 | | 100.0 | | | 174,148 | | 100.0 | | | 57,174 | | 32.8 |
| | | | | | | | | | | | | | | |
OPERATING EXPENSES: | | | | | | | | | | | | | | | |
Salaries, wages and employee benefits | | | 64,955 | | 28.1 | | | 49,298 | | 28.3 | | | 15,657 | | 31.8 |
Fuel | | | 24,734 | | 10.7 | | | 17,296 | | 9.9 | | | 7,438 | | 43.0 |
Operations and maintenance | | | 35,132 | | 15.2 | | | 27,874 | | 16.0 | | | 7,258 | | 26.0 |
Communications | | | 539 | | 0.2 | | | 370 | | 0.2 | | | 169 | | 45.7 |
Purchased freight | | | 61,598 | | 26.6 | | | 42,541 | | 24.4 | | | 19,057 | | 44.8 |
Administrative expenses | | | 8,619 | | 3.7 | | | 5,221 | | 3.0 | | | 3,398 | | 65.1 |
Sales and marketing | | | 488 | | 0.2 | | | 435 | | 0.2 | | | 53 | | 12.2 |
Taxes and licenses | | | 2,963 | | 1.3 | | | 2,268 | | 1.3 | | | 695 | | 30.6 |
Insurance and claims | | | 6,351 | | 2.7 | | | 5,065 | | 2.9 | | | 1,286 | | 25.4 |
Acquisition-related transaction expenses | | | 773 | | 0.3 | | | — | | * | | | 773 | | * |
Depreciation and amortization | | | 19,805 | | 8.6 | | | 16,998 | | 9.8 | | | 2,807 | | 16.5 |
Loss on disposition | | | (339) | | (0.1) | | | (495) | | (0.3) | | | 156 | | (31.5) |
Impairment | | | — | | * | | | 1,195 | | 0.7 | | | (1,195) | | (100.0) |
Total operating expenses | | | 225,618 | | 97.5 | | | 168,066 | | 96.5 | | | 57,552 | | 34.2 |
Operating ratio | | | 97.5% | | | | | 96.5% | | | | | | | |
Adjusted operating ratio(1) | | | 95.4% | | | | | 94.1% | | | | | | | |
INCOME FROM OPERATIONS | | | 5,704 | | 2.5 | | | 6,082 | | 3.5 | | | (378) | | (6.2) |
| | | | | | | | | | | | | | | |
Other (income) expense: | | | | | | | | | | | | | | | |
Interest income | | | (76) | | * | | | (4) | | * | | | (72) | | 1,800.0 |
Interest expense | | | 8,624 | | 3.7 | | | 6,724 | | 3.9 | | | 1,900 | | 28.3 |
Write-off of unamortized deferred financing fees | | | — | | * | | | — | | * | | | — | | * |
Other | | | (32) | | * | | | (64) | | * | | | 32 | | (50.0) |
Total other expense | | | 8,516 | | 3.7 | | | 6,656 | | 3.8 | | | 1,860 | | 27.9 |
| | | | | | | | | | | | | | | |
Loss before provision for income taxes | | | (2,812) | | (1.2) | | | (574) | | (0.3) | | | (2,238) | | 389.9 |
Provision for income taxes | | | (2,862) | | (1.2) | | | 683 | | 0.4 | | | (3,545) | | (519.0) |
Net income (loss) | | $ | 50 | | - | | $ | (1,257) | | (0.7) | | $ | 1,307 | | (104.0) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended June 30, | | | | | | | |
| | 2022 | | 2021 | | Increase (Decrease) |
(Dollars in millions, except Rate per mile and Revenue per tractor) | | Amount | | | % | | Amount | | | % | | Absolute | | | Relative |
REVENUE(1): | | | | | | | | | | | | | | | | | | | | | |
Company freight | | $ | 127.5 | | | | 47.5 | | % | | $ | 118.3 | | | | 52.3 | | % | | $ | 9.2 | | | | 7.8 | | % |
Owner operator freight | | | 48.2 | | | | 17.9 | | | | | 40.7 | | | | 18.0 | | | | | 7.5 | | | | 18.4 | | |
Brokerage | | | 44.2 | | | | 16.5 | | | | | 41.5 | | | | 18.4 | | | | | 2.7 | | | | 6.5 | | |
Logistics | | | 12.9 | | | | 4.8 | | | | | 9.3 | | | | 4.1 | | | | | 3.6 | | | | 38.7 | | |
Fuel surcharge | | | 35.8 | | | | 13.3 | | | | | 16.3 | | | | 7.2 | | | | | 19.5 | | | | 119.6 | | |
Total revenue | | $ | 268.6 | | | | 100.0 | | % | | $ | 226.1 | | | | 100.0 | | % | | $ | 42.5 | | | | 18.8 | | % |
| | | | | | | | | | | | | | | | | | | | | |
OPERATING EXPENSES(1): | | | | | | | | | | | | | | | | | | | | | |
Salaries, wages and employee benefits | | $ | 63.9 | | | | 23.8 | | % | | $ | 58.6 | | | | 25.9 | | % | | $ | 5.3 | | | | 9.0 | | % |
Fuel | | | 33.0 | | | | 12.3 | | | | | 18.6 | | | | 8.2 | | | | | 14.4 | | | | 77.4 | | |
Operations and maintenance | | | 29.1 | | | | 10.8 | | | | | 26.9 | | | | 11.9 | | | | | 2.2 | | | | 8.2 | | |
Purchased freight | | | 79.3 | | | | 29.5 | | | | | 66.2 | | | | 29.3 | | | | | 13.1 | | | | 19.8 | | |
Depreciation and amortization | | | 12.8 | | | | 4.8 | | | | | 13.0 | | | | 5.7 | | | | | (0.2 | ) | | | (1.5 | ) | |
Impairment | | | 7.8 | | | | 2.9 | | | | | — | | | | — | | | | | 7.8 | | | | 100.0 | | |
Restructuring charges | | | 0.4 | | | | 0.1 | | | | | 0.1 | | | | — | | | | | 0.3 | | | | 300.0 | | |
Other operating expenses | | | 19.6 | | | | 7.3 | | | | | 13.7 | | | | 6.1 | | | | | 5.9 | | | | 43.1 | | |
Total operating expenses | | $ | 245.9 | | | | 91.5 | | % | | $ | 197.1 | | | | 87.2 | | % | | $ | 48.8 | | | | 24.8 | | % |
| | | | | | | | | | | | | | | | | | | | | |
INCOME FROM OPERATIONS | | $ | 22.7 | | | | 8.5 | | % | | $ | 29.0 | | | | 12.8 | | % | | $ | (6.3 | ) | | | (21.7 | ) | % |
| | | | | | | | | | | | | | | | | | | | | |
OPERATING STATISTICS: | | | | | | | | | | | | | | | | | | | | | |
Company miles | | | 37.9 | | | | | | | | 38.3 | | | | | | | | (0.4 | ) | | | (1.0 | ) | % |
Owner operator miles | | | 11.0 | | | | | | | | 12.7 | | | | | | | | (1.7 | ) | | | (13.4 | ) | |
Total miles (in millions) | | | 48.9 | | | | | | | | 51.0 | | | | | | | | (2.1 | ) | | | (4.1 | ) | % |
| | | | | | | | | | | | | | | | | | | | | |
Rate per mile | | $ | 3.59 | | | | | | | $ | 3.12 | | | | | | | $ | 0.47 | | | | 15.1 | | % |
Revenue per tractor | | $ | 75,500 | | | | | | | $ | 66,700 | | | | | | | $ | 8,800 | | | | 13.2 | | % |
| | | | | | | | | | | | | | | | | | | | | |
Company owned tractors, at quarter-end | | | 1,871 | | | | | | | | 1,878 | | | | | | | | (7 | ) | | | (0.4 | ) | % |
Owner operator tractors, at quarter-end | | | 460 | | | | | | | | 511 | | | | | | | | (51 | ) | | | (10.0 | ) | |
Number of trailers, at quarter-end | | | 7,171 | | | | | | | | 7,059 | | | | | | | | 112 | | | | 1.6 | | % |
| | | | | | | | | | | | | | | | | | | | | |
Company owned tractors, average for the quarter | | | 1,860 | | | | | | | | 1,871 | | | | | | | | (11 | ) | | | (0.6 | ) | % |
Owner operator tractors, average for the quarter | | | 467 | | | | | | | | 512 | | | | | | | | (45 | ) | | | (8.8 | ) | |
Total tractors, average for the quarter | | | 2,327 | | | | | | | | 2,383 | | | | | | | | (56 | ) | | | (2.3 | ) | % |
*indicates not meaningful.
| (1)
| | Adjusted operating ratio is not a recognized measure under GAAP. For a definition of adjusted operating ratio and reconciliation of adjusted operating ratio to operating ratio, see “Non-GAAP Financial Measures” below.
|
20
The following table sets forth the Company’s Flatbed Solutions segment’s revenue, operating expenses operating ratio, adjusted operating ratio and operating income for the three months ended September 30, 2017 and 2016 infrom operations (in dollars and as a percentage of its Flatbed Solutions segment’s total revenue and the increase or decrease in the dollar amountsrevenue) of those items. The following table also sets forth certain operating statistics for the Company’s Flatbed Solutions segment for the three months ended SeptemberJune 30, 20172022 and 2016.2021, as well as certain operating statistics for the same periods. In addition, the absolute and relative changes for each are presented. Rate per mile is the period’s revenue less fuel surcharge, brokerage and logistics revenues divided by total number of company and owner operator miles driven in the period. Miles are estimated based on information received as of the filing date and may change quarter to quarter when final information is received from each operating segment. Revenue per tractor is the period’s revenue less fuel surcharge, brokerage and logistics revenues divided by the average number of tractors in the period, including owner operator tractors.
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended June 30, | | | | | | | |
| | 2022 | | 2021 | | Increase (Decrease) |
(Dollars in millions, except Rate per mile and Revenue per tractor) | | Amount | | | % | | Amount | | | % | | Absolute | | | Relative |
REVENUE(1): | | | | | | | | | | | | | | | | | | | | | |
Company freight | | $ | 42.9 | | | | 19.9 | | % | | $ | 47.7 | | | | 26.4 | | % | | $ | (4.8 | ) | | | (10.1 | ) | % |
Owner operator freight | | | 90.2 | | | | 41.8 | | | | | 88.9 | | | | 49.1 | | | | | 1.3 | | | | 1.5 | | |
Brokerage | | | 47.6 | | | | 22.0 | | | | | 25.3 | | | | 14.0 | | | | | 22.3 | | | | 88.1 | | |
Logistics | | | 1.1 | | | | 0.5 | | | | | 1.3 | | | | 0.7 | | | | | (0.2 | ) | | | (15.4 | ) | |
Fuel surcharge | | | 34.2 | | | | 15.8 | | | | | 17.7 | | | | 9.8 | | | | | 16.5 | | | | 93.2 | | |
Total revenue | | $ | 216.0 | | | | 100.0 | | % | | $ | 180.9 | | | | 100.0 | | % | | $ | 35.1 | | | | 19.4 | | % |
| | | | | | | | | | | | | | | | | | | | | |
OPERATING EXPENSES(1): | | | | | | | | | | | | | | | | | | | | | |
Salaries, wages and employee benefits | | $ | 26.6 | | | | 12.3 | | % | | $ | 29.1 | | | | 16.1 | | % | | $ | (2.5 | ) | | | (8.6 | ) | % |
Fuel | | | 12.4 | | | | 5.7 | | | | | 8.4 | | | | 4.6 | | | | | 4.0 | | | | 47.6 | | |
Operations and maintenance | | | 11.1 | | | | 5.1 | | | | | 10.5 | | | | 5.8 | | | | | 0.6 | | | | 5.7 | | |
Purchased freight | | | 121.3 | | | | 56.2 | | | | | 92.2 | | | | 51.0 | | | | | 29.1 | | | | 31.6 | | |
Depreciation and amortization | | | 9.4 | | | | 4.4 | | | | | 8.9 | | | | 4.9 | | | | | 0.5 | | | | 5.6 | | |
Other operating expenses | | | 10.6 | | | | 4.9 | | | | | 8.9 | | | | 4.9 | | | | | 1.7 | | | | 19.1 | | |
Total operating expenses | | $ | 191.4 | | | | 88.6 | | % | | $ | 158.0 | | | | 87.3 | | % | | $ | 33.4 | | | | 21.1 | | % |
| | | | | | | | | | | | | | | | | | | | | |
INCOME FROM OPERATIONS | | $ | 24.6 | | | | 11.4 | | % | | $ | 22.9 | | | | 12.7 | | % | | $ | 1.7 | | | | 7.4 | | % |
| | | | | | | | | | | | | | | | | | | | | |
OPERATING STATISTICS: | | | | | | | | | | | | | | | | | | | | | |
Company miles | | | 15.7 | | | | | | | | 19.4 | | | | | | | | (3.7 | ) | | | (19.1 | ) | % |
Owner operator miles | | | 32.9 | | | | | | | | 35.2 | | | | | | | | (2.3 | ) | | | (6.5 | ) | |
Total miles (in millions) | | | 48.6 | | | | | | | | 54.6 | | | | | | | | (6.0 | ) | | | (11.0 | ) | % |
| | | | | | | | | | | | | | | | | | | | | |
Rate per mile | | $ | 2.74 | | | | | | | $ | 2.50 | | | | | | | $ | 0.24 | | | | 9.6 | | % |
Revenue per tractor | | $ | 57,300 | | | | | | | $ | 55,500 | | | | | | | $ | 1,800 | | | | 3.2 | | % |
| | | | | | | | | | | | | | | | | | | | | |
Company owned tractors, at quarter-end | | | 781 | | | | | | | | 837 | | | | | | | | (56 | ) | | | (6.7 | ) | % |
Owner operator tractors, at quarter-end | | | 1,578 | | | | | | | | 1,601 | | | | | | | | (23 | ) | | | (1.4 | ) | |
Number of trailers, at quarter-end | | | 3,879 | | | | | | | | 4,207 | | | | | | | | (328 | ) | | | (7.8 | ) | % |
| | | | | | | | | | | | | | | | | | | | | |
Company owned tractors, average for the quarter | | | 751 | | | | | | | | 852 | | | | | | | | (101 | ) | | | (11.9 | ) | % |
Owner operator tractors, average for the quarter | | | 1,572 | | | | | | | | 1,611 | | | | | | | | (39 | ) | | | (2.4 | ) | |
Total tractors, average for the quarter | | | 2,323 | | | | | | | | 2,463 | | | | | | | | (140 | ) | | | (5.7 | ) | % |
FLATBED SOLUTIONS
21
| | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | | | | |
| | 2017 | | 2016 | | Increase (Decrease) |
(Dollars in thousands) | | $ | | % | | $ | | % | | $ | | % |
| | | | | | | | | | | | | | | |
REVENUE(1): | | | | | | | | | | | | | | | |
Freight | | $ | 67,807 | | 79.2 | | $ | 64,281 | | 81.4 | | $ | 3,526 | | 5.5 |
Brokerage | | | 9,385 | | 11.0 | | | 7,410 | | 9.4 | | | 1,975 | | 26.7 |
Logistics | | | — | | - | | | — | | - | | | — | | * |
Fuel surcharge | | | 8,400 | | 9.8 | | | 7,284 | | 9.2 | | | 1,116 | | 15.3 |
Total revenue | | | 85,592 | | 100.0 | | | 78,975 | | 100.0 | | | 6,617 | | 8.4 |
| | | | | | | | | | | | | | | |
OPERATING EXPENSES(1): | | | | | | | | | | | | | | | |
Salaries, wages and employee benefits | | | 23,538 | | 27.5 | | | 23,233 | | 29.4 | | | 305 | | 1.3 |
Fuel | | | 10,212 | | 11.9 | | | 9,401 | | 11.9 | | | 811 | | 8.6 |
Operations and maintenance | | | 9,584 | | 11.2 | | | 8,710 | | 11.0 | | | 874 | | 10.0 |
Purchased freight | | | 24,536 | | 28.7 | | | 20,169 | | 25.5 | | | 4,367 | | 21.7 |
Depreciation and amortization | | | 7,150 | | 8.4 | | | 7,650 | | 9.7 | | | (500) | | (6.5) |
Impairment | | | — | | - | | | — | | - | | | — | | * |
Other operating expenses | | | 5,817 | | 6.8 | | | 6,018 | | 7.6 | | | (201) | | (3.3) |
Total operating expenses | | | 80,837 | | 94.4 | | | 75,181 | | 95.2 | | | 5,656 | | 7.5 |
Operating ratio | | | 94.4% | | | | | 95.2% | | | | | | | |
Adjusted operating ratio(2) | | | 93.5% | | | | | 93.9% | | | | | | | |
INCOME FROM OPERATIONS | | $ | 4,755 | | 5.6 | | $ | 3,794 | | 4.8 | | $ | 961 | | 25.3 |
| | | | | | | | | | | | | | | |
OPERATING STATISTICS: | | | | | | | | | | | | | | | |
Total miles | | | 36,646,345 | | | | | 37,767,726 | | | | | (1,121,381) | | (3.0) |
Company-operated tractors | | | 1,144 | | | | | 1,162 | | | | | (18) | | (1.5) |
Owner-operated tractors | | | 469 | | | | | 441 | | | | | 28 | | 6.3 |
Number of trailers | | | 2,881 | | | | | 2,842 | | | | | 39 | | 1.4 |
*indicates not meaningful.
| (1)
| | Includes intersegment revenues and expenses, as applicable, which are eliminated in the Company’s consolidated results.
|
| (2)
| | Adjusted operating ratio is not a recognized measure under GAAP. For a definition of adjusted operating ratio and reconciliation of adjusted operating ratio to operating ratio, see “Non-GAAP Financial Measures” below.
|
Revenue. Total revenue increased 19.1% for the three months ended June 30, 2022 as compared to the same period in 2021. The increase in total revenue was primarily attributed to increased fuel surcharges due to increased fuel costs and growth in our brokerage service offering, as well as the sustained strong rate environment, with rate per mile increasing 13.4%. The increase in total revenue was partially offset by a 7.8% decrease in total miles driven.
The following table sets forth the Company’s Specialized Solutions segment’s revenue operating expenses, operating ratio, adjusted operating ratio and operating incomeincreased 18.8% for the three months ended SeptemberJune 30, 2017 and 20162022 as compared to the same period in dollars and as a percentage of its Specialized Solutions segment’s total revenue2021, primarily due to higher fuel surcharge and the increase or decreasestrong freight rate environment, primarily in the dollar amounts of those items. The following table also sets forth certain operating statistics for the Company’s Specialized Solutions segmenthigh security cargo, construction and manufacturing end-markets. Company freight increased 7.8% for the three months ended SeptemberJune 30, 20172022 as compared to the same period in 2021 due to an 8.9% increase in company rate per mile, partially offset by a 1.0% decrease in miles driven due to supply chain delays in receiving revenue equipment. Owner operator freight increased 18.4% due to a 36.7% increase in owner operator rate per mile, partially offset by a 13.4% decrease in miles driven primarily due to an 8.8% decrease in average owner operator tractors. The Company deployed company-owned assets into end-markets with higher rates and 2016.
SPECIALIZED SOLUTIONS
| | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | | | | |
| | 2017 | | 2016 | | Increase (Decrease) |
(Dollars in thousands) | | $ | | % | | $ | | % | | $ | | % |
| | | | | | | | | | | | | | | |
REVENUE(1): | | | | | | | | | | | | | | | |
Freight | | $ | 105,137 | | 71.2 | | $ | 72,367 | | 75.0 | | $ | 32,770 | | 45.3 |
Brokerage | | | 24,852 | | 16.8 | | | 18,579 | | 19.2 | | | 6,273 | | 33.8 |
Logistics | | | 7,886 | | 5.3 | | | — | | - | | | 7,886 | | * |
Fuel surcharge | | | 9,756 | | 6.6 | | | 5,588 | | 5.8 | | | 4,168 | | 74.6 |
Total revenue | | | 147,631 | | 100.0 | | | 96,534 | | 100.0 | | | 51,097 | | 52.9 |
| | | | | | | | | | | | | | | |
OPERATING EXPENSES(1): | | | | | | | | | | | | | | | |
Salaries, wages and employee benefits | | | 39,507 | | 26.8 | | | 24,714 | | 25.6 | | | 14,793 | | 59.9 |
Fuel | | | 14,521 | | 9.8 | | | 7,895 | | 8.2 | | | 6,626 | | 83.9 |
Operations and maintenance | | | 25,180 | | 17.1 | | | 18,927 | | 19.6 | | | 6,253 | | 33.0 |
Purchased freight | | | 38,965 | | 26.4 | | | 23,733 | | 24.6 | | | 15,232 | | 64.2 |
Depreciation and amortization | | | 12,618 | | 8.5 | | | 9,308 | | 9.6 | | | 3,310 | | 35.6 |
Impairment | | | — | | - | | | 1,195 | | 1.2 | | | (1,195) | | (100.0) |
Other operating expenses | | | 9,681 | | 6.6 | | | 5,023 | | 5.2 | | | 4,658 | | 92.7 |
Total operating expenses | | | 140,472 | | 95.2 | | | 90,795 | | 94.1 | | | 49,677 | | 54.7 |
Operating ratio | | | 95.2% | | | | | 94.1% | | | | | | | |
Adjusted operating ratio(2) | | | 92.6% | | | | | 91.2% | | | | | | | |
INCOME FROM OPERATIONS | | $ | 7,159 | | 4.8 | | $ | 5,739 | | 5.9 | | $ | 1,420 | | 24.7 |
| | | | | | | | | | | | | | | |
OPERATING STATISTICS: | | | | | | | | | | | | | | | |
Total miles | | | 38,948,331 | | | | | 24,266,511 | | | | | 14,681,820 | | 60.5 |
Company-operated tractors | | | 1,638 | | | | | 1,109 | | | | | 529 | | 47.7 |
Owner-operated tractors | | | 408 | | | | | 236 | | | | | 172 | | 72.9 |
Number of trailers | | | 4,813 | | | | | 3,394 | | | | | 1,419 | | 41.8 |
*indicates not meaningful.
| (1)
| | Includes intersegment revenues and expenses, as applicable, which are eliminated in the Company’s consolidated results.
|
| (2)
| | Adjusted operating ratio is not a recognized measure under GAAP. For a definition of adjusted operating ratio and reconciliation of adjusted operating ratio to operating ratio, see “Non-GAAP Financial Measures” below.
|
Revenue. Totalmargins, and as such, some of the excess volumes, for which the Company was unable to utilize company-owned assets, were captured through our brokerage service offering. This resulted in a 6.5% increase in brokerage revenue increased 32.8% to $231.3 million for the three months ended SeptemberJune 30, 2017 from $174.1 million2022 as compared to the same period in 2021. In this segment, total brokerage loads were up 2% and the brokerage revenue per load was up 4% due to higher rates during the three months ended June 30, 2022 as compared to the same period in 2021. Fuel surcharge revenue increased 119.6% for the three months ended SeptemberJune 30, 2016, primarily2022 as compared to the same period in 2021 due to the Recent Acquisitions. The change in total revenue, excluding the effect of the Recent Acquisitions, was an increase of $8.8 million, or 5.1%, due to increases in freight revenue,increased fuel surcharge and brokerage revenue. Freight revenue, excluding the effect of the Recent Acquisitions, increased $5.7 million, or 4.2%, from $135.4 million for the three months ended September 30, 2016 to $141.1 million for the three months ended September 30, 2017. Fuel surcharges, excluding the effect of the Recent Acquisitions, increased from $12.7 million for the three months ended September 30, 2016 to $14.9 million for the three months ended September 30, 2017, an increase of 17.1%. Brokerage revenue, excluding the effect of the Recent Acquisitions, increased $0.9 million, or 3.6%, from $26.0 million for the three months ended September 30, 2016 to $26.9 million for the three months ended September 30, 2017.costs.
The Company’s Flatbed Solutions segment’s revenue was $85.6 millionincreased 19.4% for the three months ended SeptemberJune 30, 2017 and $79.0 million for the three months ended September 30, 2016, an increase of 8.4%. This increase was primarily a result of increases in rates, which produced increases of $3.5 million, or 5.5%, in freight revenue and $2.0 million, or 26.7%, in brokerage revenues despite 1.1 million fewer miles2022 as compared to the same period in 2016. The $1.1 million, or 15.3%,2021, primarily due to higher fuel surcharge and the strong rate environment driven by strength in the construction, steel and manufacturing industries. Owner operator freight increased 1.5% due to an 8.6% increase in fuel surcharge revenue also contributed toowner operator rate per mile, partially offset by a 6.5% decrease in miles driven. The Company deployed company-owned assets into end-markets with higher rates and margins, and as such, some of the excess volumes, for which the Company strategically captured through our brokerage service offering. This resulted in an 88.1% increase in the Flatbed Solutions segment’s revenue.
The Company’s Specialized Solutions segment’sbrokerage revenue was $147.6 million for the three months ended SeptemberJune 30, 20172022 as compared to the same period in 2021. In this segment, total brokerage loads were up 40% and $96.5 million forthe brokerage revenue per load was up 34% due to higher rates during the three months ended SeptemberJune 30, 2016, an increase of 52.9%, which was primarily2022 as compared to the same period in 2021. Fuel surcharge revenue increased 93.2% due to the Recent Acquisitions. The
increase inincreased fuel costs. Company freight revenue excluding the effect of the Recent Acquisitions, was an increase of $2.8 million, or 2.9%, primarilydecreased 10.1% due to increasessupply chain delays in freightreceiving revenue and fuel surcharge,equipment which led to a 19.1% decrease in miles, partially offset by a slight decrease in brokerage revenues. Freight revenue, excluding the effect of the Recent Acquisitions, increased to $75.0 million for the three months ended September 30, 2017 from $72.3 million for the same period in 2016, an increase of 3.7%. Fuel surcharges, excluding the effect of the Recent Acquisitions, increased to $6.7 million for the three months ended September 30, 2017 from $5.6 million for the same period in 2016, an increase of 19.6%. Brokerage revenue, excluding the effect of the Recent Acquisitions, decreased to $17.6 million for the three months ended September 30, 2017 from $18.6 million for the same period in 2016, a decrease of 5.5%.
In both segments, the9.6% increase in fuel surcharge revenue was the result of increases in fuel prices, which commenced in the fourth quarter of 2016 and continued through the third quarter of 2017 with only a less than 1% decrease in fuel prices in the second quarter of 2017.rate per mile.
Salaries, Wages and Employee Benefits. Salaries, wages and employee benefits expense, which consists of compensation for all employees, is primarily affected by the number of miles driven by company drivers, the rate per mile paid to company drivers, employee benefits including, but not limited to, health care and workers’ compensation, and to a lesser extent, the number of, and compensation and benefits paid to, non-driver employees. In general, the Specialized Solutions segment drivers receive a higher driver pay per total mile than Flatbed Solutions segment drivers due to the former requiring a higher level of training and expertise.
Salaries, wages and employee benefits expense increased 31.8% to $65.0 million4.1% for the three months ended SeptemberJune 30, 2017 from $49.3 million for the three months ended September 30, 2016, primarily due2022 as compared to the Recent Acquisitions.same period in 2021. The increase in salaries, wages and employee benefits expense excluding the effect of the Recent Acquisitions, was 5.5%, or $2.7 million, and was primarily due to increased stock compensation, health insurance, higher driver pay and increased employee compensation, workers’ compensation premiums,headcount related to the expansion of corporate functions in legal, accounting and stock-based compensation,risk management, partially offset by a decrease in workers’ compensation claims.accrued bonuses. Salaries, wages and employee benefits expense, as a percentage of consolidated revenue (excluding brokerage revenue), decreased 2.7% for the three months ended June 30, 2022 as compared to the same period in 2021.
The Company’s Specialized Solutions segment’s salaries, wages and employee benefits expense increased 9.0% for the three months ended June 30, 2022 compared to the same period in 2021, primarily as a result of increased health insurance claims and higher driver and non-driver pay. The increased driver pay was due to a 10% increase in driver rate, slightly offset by a 1.0% decrease in Company miles. Salaries, wages and employee benefits expense, as a percentage of Specialized Solutions revenue (excluding brokerage revenue), decreased 3.2% for the three months ended June 30, 2022 as compared to the same period in 2021.
The Company’s Flatbed Solutions segment’s salaries, wages and employee benefits expense was relatively flatdecreased 8.6% for the three months ended SeptemberJune 30, 20172022 compared to the three months ended September 30, 2016.
The Company’s Specialized Solutions segment hadsame period in 2021, primarily as a $14.8 million, or 59.9%,result of the decreased employee headcount and lower driver pay due to a 19.1% decrease in Company miles, partially offset by an 11% increase in salaries,driver rate. Salaries, wages and employee benefits expense, as a percentage of Flatbed Solutions revenue (excluding brokerage revenue), decreased 2.9% for the three months ended SeptemberJune 30, 20172022 as compared to the three months ended September 30, 2016, primarily due to the Recent Acquisitions. This increase, excluding the effect of the Recent Acquisitions, was 7.5%, or $1.9 million, and was primarily due to increased employee compensation and stock-based compensation.same period in 2021.
Fuel. Fuel expense consists primarily of diesel fuel expense for company-owned tractors and fuel taxes. The primary factors affecting fuel expense are the cost of diesel fuel, the miles per gallon realized with company equipment and the number of miles driven by company drivers.
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Total fuel expense increased $7.4 million, or 43.0%, to $24.7 million67.8% for the three months ended SeptemberJune 30, 2017 from $17.3 million2022 as compared to the same period in 2021. This increase was primarily due to a 70.9% increase in fuel price, partially offset by a 7.1% decrease in Company miles driven. The Company’s Specialized Solutions segment’s fuel expense increased 77.4% for the three months ended SeptemberJune 30, 2016. This increase was2022 as compared to the same period in 2021, primarily as a result of the Recent Acquisitions and higherincrease in fuel prices. Excludingprice, partially offset by a 1.0% decrease in Company miles driven for the effect ofthree months ended June 30, 2022 as compared to the Recent Acquisitions,same period in 2021. The Company’s Flatbed Solutions segment’s fuel expense increased 11.3%, or $2.0 million.47.6% for the three months ended June 30, 2022 as compared to the same period in 2021, as a result of the increase in fuel price, partially offset by a 19.1% decrease in Company miles driven for the three months ended June 30, 2022 as compared to the same period in 2021. The U.S. national average diesel fuel price, as published by the U.S. Department of Energy, was $2.615$5.488 for the three months ended SeptemberJune 30, 2017,2022, compared to $2.381$3.212 for the same period in 2016, a 9.9% increase.2021.
The Company’s Flatbed Solutions segment’s fuel expense increased 8.6% to $10.2 million for the three months ended September 30, 2017 from $9.4 million for the three months ended September 30, 2016, primarily as a result of higher fuel prices, partially offset by a 3.0% decrease in total miles.
The Company’s Specialized Solutions segment’s fuel expense increased 83.9% to $14.5 million for the three months ended September 30, 2017 from $7.9 million for the three months ended September 30, 2016, primarily as a result of the Recent Acquisitions, higher fuel prices and an increase in total miles. Excluding the effect of the Recent Acquisitions, fuel expense in the Specialized Solutions segment increased 14.5% to $9.0 million and total miles increased 2.3%.
Operations and Maintenance. Operations and maintenance expense consists primarily of ordinary vehicle repairs and maintenance, costs associated with preparing tractors and trailers for sale or trade-in, driver recruiting, training and safety costs, permitting and pilot car fees and other general operations expenses. Operations and maintenance expense is primarily affected by the age of company-owned tractors and trailers, the number of miles driven in a period and driver turnover.
Operations and maintenance expense increased 26.0% to $35.1 million7.5% for the three months ended SeptemberJune 30, 2017 from $27.9 million for the three months ended September 30, 2016, primarily as a result of the Recent Acquisitions. Operating and maintenance expense increased 4.7% after adjusting for the effect of the Recent Acquisitions.
The Company’s Flatbed Solutions segment’s operations and maintenance expense increased $0.9 million, or 10.0%, for the three months ended September 30, 20172022 as compared to the three months ended September 30, 2016,same period in 2021 primarily from increaseddue to a $2.6 million increase in repairs, tires, and preventive maintenance and tire costs.
upkeep of tractors and trailers. The Company’s Specialized Solutions segment’s operations and maintenance expense increased $6.3 million, or 33.0%,8.2% for the three months ended SeptemberJune 30, 20172022 as compared to the three months ended September 30, 2016,same period in 2021 primarily as a result of the Recent Acquisitions. Excluding the effect of the Recent Acquisitions,a $1.9 million increase in repairs and tires for tractors and trailers. The Company’s Flatbed Solutions segment’s operations and maintenance expense was relatively flatgenerally consistent for the three months ended SeptemberJune 30, 20172022 as compared to the same period in 2021. Operations and maintenance expense, as a percentage of consolidated revenue (excluding brokerage revenue), was generally consistent for the three months ended SeptemberJune 30, 2016.2022 as compared to the same period in 2021.
Purchased Freight. Purchased freight expense consists of the payments to owner-operators,owner operators, including fuel surcharge reimbursements, and payments to third-party capacity providers that haul loads brokered to them. Purchased freight expense generally takes into account changes in diesel fuel prices, resulting in lowerhigher payments during periods of decliningincreasing fuel prices.
Total purchased freight expense increased 44.8% from $42.5 million26.9% during the three months ended SeptemberJune 30, 20162022 as compared to $61.6 millionthe same period in 2021. Purchased freight expense from owner operators was generally consistent during the three months ended SeptemberJune 30, 2017, primarily2022 as a result ofcompared to the Recent Acquisitions. Excluding the effect of the Recent Acquisitions on purchased freight expense, total purchased freight expense increased 9.5% to $46.6 million for the three months ended September 30, 2017. Purchased freight expense from owner-operators, excluding the Recent Acquisitions, increased 13.1% from $23.0 million during the three months ended September 30, 2016 to $26.0 million during the three months ended September 30, 2017, primarily as a result of increasessame period in fuel surcharge reimbursements made to owner-operators as a result of higher fuel prices.2021. Purchased freight expense from third-party capacity providers excluding the Recent Acquisitions, increased 6.3% from $18.9$41.8 million, or 86.0%, during the three months ended SeptemberJune 30, 20162022 as compared to $20.0 millionthe same period in 2021, as a result of an increase in utilization of third-party capacity providers due to supply chain delays in receiving revenue equipment. In addition, the cost of diesel fuel increased by 70.9% during the three months ended SeptemberJune 30, 2017, primarily2022 as compared to the same period in 2021. Purchased freight expense, as a percentage of consolidated revenue, for the three months ended June 30, 2022, increased 2.5% as compared to the same period in 2021.
The Company’s Specialized Solutions segment’s purchased freight expense increased 19.8% during the three months ended June 30, 2022 as compared to the same period in 2021. Purchased freight expense from owner operators increased $3.6 million, or 11.4%, during the three months ended June 30, 2022 as compared to the same period in 2021, as a result of thea 36.7% increase in rates on brokered loads.owner operators’ rate, partially offset by a 13.4% decrease in owner operator miles driven. Purchased freight expense from third-party capacity providers increased $9.5 million, or 27.5%, during the three months ended June 30, 2022 as compared to the same period in 2021, as a result of an increase in utilization of third-party capacity providers due to supply chain delays in receiving revenue equipment. As mentioned above, there was also an increase in the cost of diesel fuel during the three months ended June 30, 2022 as compared to the same period in 2021. Purchased freight expense, as a percentage of Specialized Solutions revenue, for the three months ended June 30, 2022, increased 0.2% as compared to the same period in 2021.
The Company’s Flatbed Solutions segment’s purchased freight expense increased 21.7% to $24.5 million31.6% for the three months ended SeptemberJune 30, 20172022 as compared to the same period in 2021. Purchased freight expense from $20.2owner operators decreased $3.6 million, or 4.8%, for the three months ended SeptemberJune 30, 2016, primarily due2022 as compared to higher utilizationthe same period in 2021, as a result of owner-operators and third party capacity providersa 6.5% decrease in the Company’s Flatbed Solutions segment. Purchased freight expense from owner-operators increased 15.8% to $17.3 million for the three months ended September 30, 2017 from $14.9 million for the three months ended September 30, 2016 due toowner operator miles driven, partially offset by an 8.6% increase in owner-operator loads.owner operators’ rate. Purchased freight expense from third-party capacity providers increased 43.8% from $4.7$32.7 million, or 191.2%, during the three months ended SeptemberJune 30, 20162022 as compared to $6.7 million during the three months ended September 30, 2017, primarily as a result of the increasesame period in brokered loads in the Company’s Flatbed Solutions segment.
The Company’s Specialized Solutions segment’s purchased freight expense increased 64.2% to $39.0 million during the three months ended September 30, 2017 from $23.7 million during the three months ended September 30, 2016, primarily as a result of the Recent Acquisitions. Excluding the effect of the Recent Acquisitions on purchased freight expense, total purchased freight expense increased 1.0% to $24.0 million for the three months ended September 30, 2017. Purchased freight expense from owner-operators, excluding the Recent Acquisitions, increased 8.1% to $8.8 million for the three months ended September 30, 2017 from $8.1 million for the three months ended September 30, 2016. Purchased freight expense from third-party capacity providers, excluding the Recent Acquisitions, decreased 6.1% from $14.2 million during the three months ended September 30, 2016 to $13.3 million during the three months ended September 30, 2017,2021, primarily as a result of increased utilization of company driversthird-party capacity providers due to supply chain delays in receiving revenue equipment. As mentioned above, there was also an increase in the cost of diesel fuel during the quarter.three months ended June 30, 2022 as compared to the same period in 2021. Purchased freight expense, as a percentage of Flatbed Solutions revenue, for the three months ended June 30, 2022, increased 5.2% as compared to the same period in 2021.
Depreciation and Amortization. Depreciation and amortization expense consists primarily of depreciation for company-owned tractors and trailers orand amortization of those financed with capitalfinance leases. The primary factors affecting these expense items include the size of the fleet and age of company-owned tractors and trailers and the cost of new equipment. Amortization of intangible assets is also included in this expense.
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Table of Contents
Depreciation and amortization expense increased 16.5% to $19.8 million duringwas generally consistent for the three months ended SeptemberJune 30, 2017 from $17.0 million during2022 as compared to the three months ended September 30, 2016, primarily as a result of the Recent Acquisitions. After adjusting for the effect of the Recent Acquisitions,same period in 2021. The Company’s Specialized Solutions segment’s depreciation and amortization expense decreased 7.0%, primarily1.5% for the three months ended June 30, 2022 as compared to the same period in 2021 as a result of a 1.2% reduction0.6% decrease in company-owned tractors, excluding company-owned tractorsaverage tractor count in the segment’s fleet. The Company’s Flatbed Solutions segment’s depreciation and amortization expense increased 5.6% for the three months ended June 30, 2022 as compared to the same period in 2021 as a result of recent revenue equipment additions partially offset by disposals of fully depreciated revenue equipment.
Impairment. Impairment expense was $7.8 million for the Recent Acquisitions, combined withthree months ended June 30, 2022 related to goodwill, trade name intangibles, and customer relationships intangibles of an increasing shift in utilizationintegrated operating segment within the Company’s Specialized Solutions segment. There was no impairment expense for the three months ended June 30, 2021. The Company’s Specialized Solutions segment’s impairment expense was $7.8 million consisting of operating leases$5.7 million related to finance capital expenditures.
goodwill, $1.9 million related to trade name intangibles, and $0.2 million related to customer relationships intangibles for the three months ended June 30, 2022. The Company’s Specialized Solutions segment had no impairment expense for three months ended June 30, 2021. The Company’s Flatbed Solutions segment had a 6.5% decrease in depreciation and amortizationno impairment expense for the three months ended SeptemberJune 30, 2017 as compared to the three months ended September 30, 2016 primarily as a result of a 1.5% reduction in company-owned tractors.2022 and 2021.
The Company’s Specialized Solutions segment had a 35.6% increase in depreciation and amortization expense for the three months ended September 30, 2017 as compared to the three months ended September 30, 2016 primarily as a result of the Recent Acquisitions. After adjusting for the effect of the Recent Acquisitions, depreciation and amortization expense decreased 7.4%, primarily as a result of a 0.9% reduction in company-owned tractors, excluding company-owned tractors of the Recent Acquisitions, combined with an increasing shift in utilization of operating leases to finance capital expenditures.
Taxes and Licenses. Operating taxes and licenses expense primarily represents the costs of taxes and licenses associated with the Company’s fleet of equipment and will vary according to the size of its equipment fleet. Taxes and license expense increased from $2.3 million for the three months ended September 30, 2016 to $3.0 million for the three months ended September 30, 2017. Excluding the effect of the Recent Acquisitions, operating taxes and license expense, as a percentage of revenue, was 1.2% for the three months ended September 30, 2017 and 1.3% for the three months ended September 30, 2016.
Insurance and Claims. Insurance and claims expense consists of insurance premiums and the accruals the Company makes for estimated payments and expenses for claims for bodily injury, property damage, cargo damage and other casualty events. The primary factorsfactor affecting the Company’s insurance and claims expense areis seasonality (the Company typically experiences higher accident frequency in winter months), the frequency and severity of accidents, trends in the development factors used in its accruals and developments in large, prior-year claims. The frequency of accidents tends to increasecorrelate with the miles the Company travels.travels; however, insurance and claims expense could increase in periods where there are claims in excess of the Company’s self-insured retention. Insurance and claims expense increased 25.4% to $6.3 million77.8% during the three months ended SeptemberJune 30, 20172022 as compared to the same period in 2021 primarily due to a $5.8 million increase in our estimate of incurred but not reported claims, combined with a $1.9 million increase in insurance claims, primarily resulting from $5.1claims over the Company’s self-insured retention. In addition, there was a $0.3 million during the three months ended September 30, 2016, primarily as a result of the Recent Acquisitions. Excluding the effect of the Recent Acquisitions,increase in certain insurance and claims, as a percentage of revenue, was 2.8% for the three months ended September 30, 2017 and 2.9% for the three months ended September 30, 2016.premiums.
InterestOther (Income) Expense.Interest expense consists of cash interest, non-cash paid-in-kind interest, amortization and write-off of related issuance costs and fees and prepayment penalties.fees. Interest expense increased 28.3% to $8.6 million duringwas generally consistent for the three months ended SeptemberJune 30, 2017 from $6.7 million2022 as compared to the same period in 2021. The Company’s common stock purchase warrants expired during the three months ended September 30, 2016. This increaseMarch 31, 2022 and are no longer exercisable. Change in fair value of warrant liability was primarily attributablea gain of $7.8 million for the same period in 2021. The change in fair value is directly related to an increase in amortizationthe fair value of debt issuance coststhe warrant liability as of each period end as calculated using Level 1 and higher interest rates on the Term Loan Facility as compared to debt outstanding in 2016 under the Senior Term Loan and Equipment Term Loans.Level 3 inputs.
Income Tax. Provision for income taxes decreased from $0.7Income tax expense was $7.7 million for the three months ended SeptemberJune 30, 20162022 compared to a benefitincome tax expense of $2.9$10.7 million for the same period in 2021. The effective tax rate was 30.3% for the three months ended SeptemberJune 30, 2017. The decrease is primarily the result of the increase in loss before provision for income tax of $2.2 million for the three months ended September 30, 20172022, compared to 23.3% for the same period in 2016.2021. The difference between the Company’s effective tax rate was 101.8% for the three months ended September 30, 2017, compared to (119.0%) for the three months ended September 30, 2016. The effective income tax rate varies fromand the federal statutory rate of 35% primarily due to state income taxes andresults from the impact of nondeductiblethe permanent differences, including driver per diems, transaction expenses and withdrawn Private Daseke IPO expenses.disallowance of goodwill impairment in the second quarter of 2022.
24
The following table sets forth itemsrevenue, operating expenses and income from operations (in dollars and as a percentage of total revenue), derived from the Company’s consolidated statements of operations, for the ninesix months ended SeptemberJune 30, 20172022 and 20162021, as well as certain operating statistics for the same periods. In addition, the absolute and relative changes for each are presented. Rate per mile is the period’s revenue less fuel surcharge, brokerage and logistics revenues divided by total number of company and owner operator miles driven in the period. Miles are estimated based on information received as of the filing date and may change quarter to quarter when final information is received from each operating segment. Revenue per tractor is the period’s revenue less fuel surcharge, brokerage and logistics revenues divided by the average number of tractors in the period, including owner operator tractors.
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Six Months Ended June 30, | | | | | | | |
| | 2022 | | 2021 | | Increase (Decrease) |
(Dollars in millions, except Rate per mile and Revenue per tractor) | | Amount | | | % | | Amount | | | % | | Absolute | | | Relative |
REVENUE: | | | | | | | | | | | | | | | | | | | | | |
Company freight | | $ | 323.8 | | | | 35.9 | | % | | $ | 308.7 | | | | 41.8 | | % | | $ | 15.1 | | | | 4.9 | | % |
Owner operator freight | | | 267.7 | | | | 29.7 | | | | | 234.2 | | | | 31.7 | | | | | 33.5 | | | | 14.3 | | |
Brokerage | | | 170.1 | | | | 18.9 | | | | | 115.2 | | | | 15.6 | | | | | 54.9 | | | | 47.7 | | |
Logistics | | | 25.4 | | | | 2.8 | | | | | 19.2 | | | | 2.6 | | | | | 6.2 | | | | 32.3 | | |
Fuel surcharge | | | 115.3 | | | | 12.7 | | | | | 60.6 | | | | 8.3 | | | | | 54.7 | | | | 90.3 | | |
Total revenue | | $ | 902.3 | | | | 100.0 | | % | | $ | 737.9 | | | | 100.0 | | % | | $ | 164.4 | | | | 22.3 | | % |
| | | | | | | | | | | | | | | | | | | | | |
OPERATING EXPENSES: | | | | | | | | | | | | | | | | | | | | | |
Salaries, wages and employee benefits | | $ | 194.7 | | | | 21.6 | | % | | $ | 184.1 | | | | 24.9 | | % | | $ | 10.6 | | | | 5.8 | | % |
Fuel | | | 80.4 | | | | 8.9 | | | | | 52.4 | | | | 7.1 | | | | | 28.0 | | | | 53.4 | | |
Operations and maintenance | | | 74.5 | | | | 8.3 | | | | | 67.6 | | | | 9.2 | | | | | 6.9 | | | | 10.2 | | |
Communications | | | 1.9 | | | | 0.2 | | | | | 2.2 | | | | 0.3 | | | | | (0.3 | ) | | | (13.6 | ) | |
Purchased freight | | | 368.6 | | | | 40.9 | | | | | 276.7 | | | | 37.5 | | | | | 91.9 | | | | 33.2 | | |
Administrative | | | 34.0 | | | | 3.8 | | | | | 29.2 | | | | 4.0 | | | | | 4.8 | | | | 16.4 | | |
Sales and marketing | | | 1.0 | | | | 0.1 | | | | | 1.1 | | | | 0.1 | | | | | (0.1 | ) | | | (9.1 | ) | |
Taxes and licenses | | | 7.7 | | | | 0.9 | | | | | 7.7 | | | | 1.0 | | | | | — | | | | — | | |
Insurance and claims | | | 41.0 | | | | 4.5 | | | | | 26.7 | | | | 3.6 | | | | | 14.3 | | | | 53.6 | | |
Acquisition-related transaction expenses | | | 3.3 | | | | 0.4 | | | | | — | | | | — | | | | | 3.3 | | | | 100.0 | | |
Depreciation and amortization | | | 44.3 | | | | 4.9 | | | | | 44.4 | | | | 6.0 | | | | | (0.1 | ) | | | (0.2 | ) | |
Gain on disposition of revenue property and equipment | | | (9.1 | ) | | | (1.0 | ) | | | | (7.7 | ) | | | (1.0 | ) | | | | (1.4 | ) | | | 18.2 | | |
Impairment | | | 7.8 | | | | 0.9 | | | | | — | | | | — | | | | | 7.8 | | | | 100.0 | | |
Restructuring charges | | | 1.2 | | | | 0.1 | | | | | 0.1 | | | | — | | | | | 1.1 | | | | 1,100.0 | | |
Total operating expenses | | $ | 851.3 | | | | 94.3 | | % | | $ | 684.5 | | | | 92.8 | | % | | $ | 166.8 | | | | 24.4 | | % |
| | | | | | | | | | | | | | | | | | | | | |
INCOME FROM OPERATIONS | | $ | 51.0 | | | | 5.7 | | % | | $ | 53.4 | | | | 7.2 | | % | | $ | (2.4 | ) | | | (4.5 | ) | % |
| | | | | | | | | | | | | | | | | | | | | |
Other expense: | | | | | | | | | | | | | | | | | | | | | |
Interest income | | $ | (0.8 | ) | | | (0.1 | ) | % | | $ | (0.2 | ) | | | — | | % | | $ | (0.6 | ) | | | 300.0 | | % |
Interest expense | | | 14.6 | | | | 1.6 | | | | | 18.7 | | | | 2.5 | | | | | (4.1 | ) | | | (21.9 | ) | |
Change in fair value of warrant liability | | | (4.7 | ) | | | (0.5 | ) | | | | (2.2 | ) | | | (0.3 | ) | | | | (2.5 | ) | | | 113.6 | | |
Other | | | 0.1 | | | | — | | | | | (0.8 | ) | | | (0.1 | ) | | | | 0.9 | | | | (112.5 | ) | |
Total other expense | | $ | 9.2 | | | | 1.0 | | % | | $ | 15.5 | | | | 2.1 | | % | | $ | (6.3 | ) | | | (40.6 | ) | % |
| | | | | | | | | | | | | | | | | | | | | |
Income before income taxes | | | 41.8 | | | | 4.6 | | % | | | 37.9 | | | | 5.1 | | % | | | 3.9 | | | | 10.3 | | % |
Income tax expense | | | 11.1 | | | | 1.2 | | | | | 9.9 | | | | 1.3 | | | | | 1.2 | | | | 12.1 | | |
Net income | | $ | 30.7 | | | | 3.4 | | % | | $ | 28.0 | | | | 3.8 | | % | | $ | 2.7 | | | | 9.6 | | % |
| | | | | | | | | | | | | | | | | | | | | |
OPERATING STATISTICS: | | | | | | | | | | | | | | | | | | | | | |
Company miles | | | 105.3 | | | | | | | | 116.4 | | | | | | | | (11.1 | ) | | | (9.5 | ) | % |
Owner operator miles | | | 88.7 | | | | | | | | 92.6 | | | | | | | | (3.9 | ) | | | (4.2 | ) | |
Total miles (in millions) | | | 194.0 | | | | | | | | 209.0 | | | | | | | | (15.0 | ) | | | (7.2 | ) | % |
| | | | | | | | | | | | | | | | | | | | | |
Rate per mile | | $ | 3.05 | | | | | | | $ | 2.60 | | | | | | | $ | 0.45 | | | | 17.3 | | % |
Revenue per tractor | | $ | 127,700 | | | | | | | $ | 111,100 | | | | | | | $ | 16,600 | | | | 14.9 | | % |
| | | | | | | | | | | | | | | | | | | | | |
Company owned tractors, at quarter-end | | | 2,652 | | | | | | | | 2,715 | | | | | | | | (63 | ) | | | (2.3 | ) | % |
Owner operator tractors, at quarter-end | | | 2,038 | | | | | | | | 2,112 | | | | | | | | (74 | ) | | | (3.5 | ) | |
Number of trailers, at quarter-end | | | 11,050 | | | | | | | | 11,266 | | | | | | | | (216 | ) | | | (1.9 | ) | % |
| | | | | | | | | | | | | | | | | | | | | |
Company owned tractors, average for the period | | | 2,583 | | | | | | | | 2,778 | | | | | | | | (195 | ) | | | (7.0 | ) | % |
Owner operator tractors, average for the period | | | 2,049 | | | | | | | | 2,110 | | | | | | | | (61 | ) | | | (2.9 | ) | |
Total tractors, average for the period | | | 4,632 | | | | | | | | 4,888 | | | | | | | | (256 | ) | | | (5.2 | ) | % |
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Table of Contents
The following table sets forth revenue, operating expenses and income from operations (in dollars and as a percentage of total revenue) of the Company’s Specialized Solutions segment for the six months ended June 30, 2022 and 2021, as well as certain operating statistics for the same periods. In addition, the absolute and relative changes for each are presented. Rate per mile is the period’s revenue less fuel surcharge, brokerage and the increase or decreaselogistics revenues divided by total number of company and owner operator miles driven in the dollar amountsperiod. Miles are estimated based on information received as of those items.the filing date and may change quarter to quarter when final information is received from each operating segment. Revenue per tractor is the period’s revenue less fuel surcharge, brokerage and logistics revenues divided by the average number of tractors in the period, including owner operator tractors.
SPECIALIZED SOLUTIONS
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Six Months Ended June 30, | | | | | | | |
| | 2022 | | 2021 | | Increase (Decrease) |
(Dollars in millions, except Rate per mile and Revenue per tractor) | | Amount | | | % | | Amount | | | % | | Absolute | | | Relative |
REVENUE(1): | | | | | | | | | | | | | | | | | | | | | |
Company freight | | $ | 244.0 | | | | 49.1 | | % | | $ | 221.1 | | | | 54.0 | | % | | $ | 22.9 | | | | 10.4 | | % |
Owner operator freight | | | 90.3 | | | | 18.2 | | | | | 75.3 | | | | 18.4 | | | | | 15.0 | | | | 19.9 | | |
Brokerage | | | 81.3 | | | | 16.4 | | | | | 68.1 | | | | 16.6 | | | | | 13.2 | | | | 19.4 | | |
Logistics | | | 23.4 | | | | 4.7 | | | | | 16.5 | | | | 4.0 | | | | | 6.9 | | | | 41.8 | | |
Fuel surcharge | | | 58.1 | | | | 11.6 | | | | | 28.8 | | | | 7.0 | | | | | 29.3 | | | | 101.7 | | |
Total revenue | | $ | 497.1 | | | | 100.0 | | % | | $ | 409.8 | | | | 100.0 | | % | | $ | 87.3 | | | | 21.3 | | % |
| | | | | | | | | | | | | | | | | | | | | |
OPERATING EXPENSES(1): | | | | | | | | | | | | | | | | | | | | | |
Salaries, wages and employee benefits | | $ | 125.8 | | | | 25.3 | | % | | $ | 115.2 | | | | 28.1 | | % | | $ | 10.6 | | | | 9.2 | | % |
Fuel | | | 58.1 | | | | 11.7 | | | | | 35.7 | | | | 8.7 | | | | | 22.4 | | | | 62.7 | | |
Operations and maintenance | | | 53.3 | | | | 10.7 | | | | | 46.9 | | | | 11.4 | | | | | 6.4 | | | | 13.6 | | |
Purchased freight | | | 145.8 | | | | 29.3 | | | | | 115.5 | | | | 28.2 | | | | | 30.3 | | | | 26.2 | | |
Depreciation and amortization | | | 25.2 | | | | 5.1 | | | | | 26.2 | | | | 6.4 | | | | | (1.0 | ) | | | (3.8 | ) | |
Impairment | | | 7.8 | | | | 1.6 | | | | | — | | | | — | | | | | 7.8 | | | | 100.0 | | |
Restructuring charges | | | 0.4 | | | | 0.1 | | | | | 0.1 | | | | — | | | | | 0.3 | | | | 300.0 | | |
Other operating expenses | | | 40.4 | | | | 8.1 | | | | | 30.7 | | | | 7.5 | | | | | 9.7 | | | | 31.6 | | |
Total operating expenses | | $ | 456.8 | | | | 91.9 | | % | | $ | 370.3 | | | | 90.4 | | % | | $ | 86.5 | | | | 23.4 | | % |
| | | | | | | | | | | | | | | | | | | | | |
INCOME FROM OPERATIONS | | $ | 40.3 | | | | 8.1 | | % | | $ | 39.5 | | | | 9.6 | | % | | $ | 0.8 | | | | 2.0 | | % |
| | | | | | | | | | | | | | | | | | | | | |
OPERATING STATISTICS: | | | �� | | | | | | | | | | | | | | | | | | |
Company miles | | | 73.8 | | | | | | | | 76.2 | | | | | | | | (2.4 | ) | | | (3.1 | ) | % |
Owner operator miles | | | 21.6 | | | | | | | | 24.1 | | | | | | | | (2.5 | ) | | | (10.4 | ) | |
Total miles (in millions) | | | 95.4 | | | | | | | | 100.3 | | | | | | | | (4.9 | ) | | | (4.9 | ) | % |
| | | | | | | | | | | | | | | | | | | | | |
Rate per mile | | $ | 3.50 | | | | | | | $ | 2.96 | | | | | | | $ | 0.54 | | | | 18.2 | | % |
Revenue per tractor | | $ | 145,000 | | | | | | | $ | 124,000 | | | | | | | $ | 21,000 | | | | 16.9 | | % |
| | | | | | | | | | | | | | | | | | | | | |
Company owned tractors, at quarter-end | | | 1,871 | | | | | | | | 1,878 | | | | | | | | (7 | ) | | | (0.4 | ) | % |
Owner operator tractors, at quarter-end | | | 460 | | | | | | | | 511 | | | | | | | | (51 | ) | | | (10.0 | ) | |
Number of trailers, at quarter-end | | | 7,171 | | | | | | | | 7,059 | | | | | | | | 112 | | | | 1.6 | | % |
| | | | | | | | | | | | | | | | | | | | | |
Company owned tractors, average for the period | | | 1,830 | | | | | | | | 1,882 | | | | | | | | (52 | ) | | | (2.8 | ) | % |
Owner operator tractors, average for the period | | | 476 | | | | | | | | 509 | | | | | | | | (33 | ) | | | (6.5 | ) | |
Total tractors, average for the period | | | 2,306 | | | | | | | | 2,391 | | | | | | | | (85 | ) | | | (3.6 | ) | % |
| | | | | | | | | | | | | | | |
| | Nine Months Ended September 30, | | | | | |
| | 2017 | | 2016 | | Increase (Decrease) |
(Dollars in thousands) | | $ | | % | | $ | | % | | $ | | % |
| | | | | | | | | | | | | | | |
REVENUE: | | | | | | | | | | | | | | | |
Freight | | $ | 446,454 | | 75.8 | | $ | 398,466 | | 79.5 | | $ | 47,988 | | 12.0 |
Brokerage | | | 83,723 | | 14.2 | | | 68,358 | | 13.6 | | | 15,365 | | 22.5 |
Logistics | | | 10,571 | | 1.8 | | | — | | * | | | 10,571 | | * |
Fuel surcharge | | | 48,331 | | 8.2 | | | 34,562 | | 6.9 | | | 13,769 | | 39.8 |
Total revenue | | | 589,079 | | 100.0 | | | 501,386 | | 100.0 | | | 87,693 | | 17.5 |
| | | | | | | | | | | | | | | |
OPERATING EXPENSES: | | | | | | | | | | | | | | | |
Salaries, wages and employee benefits | | | 174,253 | | 29.6 | | | 149,861 | | 29.9 | | | 24,392 | | 16.3 |
Fuel | | | 64,423 | | 10.9 | | | 49,076 | | 9.8 | | | 15,347 | | 31.3 |
Operations and maintenance | | | 86,332 | | 14.7 | | | 72,933 | | 14.5 | | | 13,399 | | 18.4 |
Communications | | | 1,491 | | 0.3 | | | 1,208 | | 0.2 | | | 283 | | 23.4 |
Purchased freight | | | 148,945 | | 25.3 | | | 120,501 | | 24.0 | | | 28,444 | | 23.6 |
Administrative expenses | | | 24,019 | | 4.1 | | | 17,711 | | 3.5 | | | 6,308 | | 35.6 |
Sales and marketing | | | 1,425 | | 0.2 | | | 1,280 | | 0.3 | | | 145 | | 11.3 |
Taxes and licenses | | | 7,855 | | 1.3 | | | 6,946 | | 1.4 | | | 909 | | 13.1 |
Insurance and claims | | | 15,516 | | 2.6 | | | 13,648 | | 2.7 | | | 1,868 | | 13.7 |
Acquisition-related transaction expenses | | | 2,255 | | 0.4 | | | 18 | | * | | | 2,237 | | * |
Depreciation and amortization | | | 53,758 | | 9.1 | | | 50,515 | | 10.1 | | | 3,243 | | 6.4 |
(Gain) loss on disposition | | | (513) | | (0.1) | | | 158 | | * | | | (671) | | (424.7) |
Impairment | | | — | | | | | 1,195 | | 0.2 | | | (1,195) | | (100.0) |
Total operating expenses | | | 579,759 | | 98.4 | | | 485,050 | | 96.7 | | | 94,709 | | 19.5 |
Operating ratio | | | 98.4% | | | | | 96.7% | | | | | | | |
Adjusted operating ratio(1) | | | 96.2% | | | | | 94.2% | | | | | | | |
INCOME FROM OPERATIONS | | | 9,320 | | 1.6 | | | 16,336 | | 3.3 | | | (7,016) | | (42.9) |
| | | | | | | | | | | | | | | |
Other (income) expense: | | | | | | | | | | | | | | | |
Interest income | | | (130) | | * | | | (40) | | * | | | (90) | | 225.0 |
Interest expense | | | 21,064 | | 3.6 | | | 17,521 | | 3.5 | | | 3,543 | | 20.2 |
Write-off of unamortized deferred financing fees | | | 3,883 | | 0.7 | | | — | | * | | | 3,883 | | * |
Other | | | (247) | | * | | | (266) | | (0.1) | | | 19 | | (7.1) |
Total other expense | | | 24,570 | | 4.2 | | | 17,215 | | 3.4 | | | 7,355 | | 42.7 |
| | | | | | | | | | | | | | | |
Loss before benefit for income taxes | | | (15,250) | | (2.6) | | | (879) | | (0.2) | | | (14,371) | | 1,634.9 |
Benefit for income taxes | | | (3,448) | | (0.6) | | | 607 | | 0.1 | | | (4,055) | | (668.0) |
Net loss | | $ | (11,802) | | (2.0) | | $ | (1,486) | | (0.3) | | $ | (10,316) | | 694.2 |
Includes intersegment revenues and expenses, as applicable, which are eliminated in the Company’s consolidated results.
*indicates not meaningful.26
| (1)
| | Adjusted operating ratio is not a recognized measure under GAAP. For a definition of adjusted operating ratio and reconciliation of adjusted operating ratio to operating ratio, see “Non-GAAP Financial Measures” below.
|
The following table sets forth the Company’s Flatbed Solutions segment’s revenue, operating expenses operating ratio, adjusted operating ratio and operating income for the nine months ended September 30, 2017 and 2016 infrom operations (in dollars and as a percentage of its Flatbed Solutions segment’s total revenue and the increase or decrease in the dollar amountsrevenue) of those items. The following table also sets forth certain operating statistics for the Company’s Flatbed Solutions segment for the ninesix months ended SeptemberJune 30, 20172022 and 2016.2021, as well as certain operating statistics for the same periods. In addition, the absolute and relative changes for each are presented. Rate per mile is the period’s revenue less fuel surcharge, brokerage and logistics revenues divided by total number of company and owner operator miles driven in the period. Miles are estimated based on information received as of the filing date and may change quarter to quarter when final information is received from each operating segment. Revenue per tractor is the period’s revenue less fuel surcharge, brokerage and logistics revenues divided by the average number of tractors in the period, including owner operator tractors.
FLATBED SOLUTIONS
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Six Months Ended June 30, | | | | | | | |
| | 2022 | | 2021 | | Increase (Decrease) |
(Dollars in millions, except Rate per mile and Revenue per tractor) | | Amount | | | % | | Amount | | | % | | Absolute | | | Relative |
REVENUE(1): | | | | | | | | | | | | | | | | | | | | | |
Company freight | | $ | 84.4 | | | | 20.5 | | % | | $ | 92.4 | | | | 27.6 | | % | | $ | (8.0 | ) | | | (8.7 | ) | % |
Owner operator freight | | | 178.3 | | | | 43.4 | | | | | 159.9 | | | | 47.8 | | | | | 18.4 | | | | 11.5 | | |
Brokerage | | | 88.8 | | | | 21.6 | | | | | 47.5 | | | | 14.2 | | | | | 41.3 | | | | 86.9 | | |
Logistics | | | 2.0 | | | | 0.5 | | | | | 2.5 | | | | 0.7 | | | | | (0.5 | ) | | | (20.0 | ) | |
Fuel surcharge | | | 57.6 | | | | 14.0 | | | | | 32.1 | | | | 9.7 | | | | | 25.5 | | | | 79.4 | | |
Total revenue | | $ | 411.1 | | | | 100.0 | | % | | $ | 334.4 | | | | 100.0 | | % | | $ | 76.7 | | | | 22.9 | | % |
| | | | | | | | | | | | | | | | | | | | | |
OPERATING EXPENSES(1): | | | | | | | | | | | | | | | | | | | | | |
Salaries, wages and employee benefits | | $ | 54.6 | | | | 13.3 | | % | | $ | 57.7 | | | | 17.3 | | % | | $ | (3.1 | ) | | | (5.4 | ) | % |
Fuel | | | 22.3 | | | | 5.4 | | | | | 16.7 | | | | 5.0 | | | | | 5.6 | | | | 33.5 | | |
Operations and maintenance | | | 21.4 | | | | 5.2 | | | | | 20.8 | | | | 6.2 | | | | | 0.6 | | | | 2.9 | | |
Purchased freight | | | 229.1 | | | | 55.7 | | | | | 167.6 | | | | 50.1 | | | | | 61.5 | | | | 36.7 | | |
Depreciation and amortization | | | 18.4 | | | | 4.5 | | | | | 17.7 | | | | 5.3 | | | | | 0.7 | | | | 4.0 | | |
Other operating expenses | | | 24.8 | | | | 6.0 | | | | | 20.0 | | | | 6.0 | | | | | 4.8 | | | | 24.0 | | |
Total operating expenses | | $ | 370.6 | | | | 90.1 | | % | | $ | 300.5 | | | | 89.9 | | % | | $ | 70.1 | | | | 23.3 | | % |
| | | | | | | | | | | | | | | | | | | | | |
INCOME FROM OPERATIONS | | $ | 40.5 | | | | 9.9 | | % | | $ | 33.9 | | | | 10.1 | | % | | $ | 6.6 | | | | 19.5 | | % |
| | | | | | | | | | | | | | | | | | | | | |
OPERATING STATISTICS: | | | | | | | | | | | | | | | | | | | | | |
Company miles | | | 31.5 | | | | | | | | 40.2 | | | | | | | | (8.7 | ) | | | (21.6 | ) | % |
Owner operator miles | | | 67.1 | | | | | | | | 68.5 | | | | | | | | (1.4 | ) | | | (2.0 | ) | |
Total miles (in millions) | | | 98.6 | | | | | | | | 108.7 | | | | | | | | (10.1 | ) | | | (9.3 | ) | % |
| | | | | | | | | | | | | | | | | | | | | |
Rate per mile | | $ | 2.66 | | | | | | | $ | 2.32 | | | | | | | $ | 0.34 | | | | 14.7 | | % |
Revenue per tractor | | $ | 112,900 | | | | | | | $ | 101,000 | | | | | | | $ | 11,900 | | | | 11.8 | | % |
| | | | | | | | | | | | | | | | | | | | | |
Company owned tractors, at quarter-end | | | 781 | | | | | | | | 837 | | | | | | | | (56 | ) | | | (6.7 | ) | % |
Owner operator tractors, at quarter-end | | | 1,578 | | | | | | | | 1,601 | | | | | | | | (23 | ) | | | (1.4 | ) | |
Number of trailers, at quarter-end | | | 3,879 | | | | | | | | 4,207 | | | | | | | | (328 | ) | | | (7.8 | ) | % |
| | | | | | | | | | | | | | | | | | | | | |
Company owned tractors, average for the period | | | 753 | | | | | | | | 896 | | | | | | | | (143 | ) | | | (16.0 | ) | % |
Owner operator tractors, average for the period | | | 1,573 | | | | | | | | 1,601 | | | | | | | | (28 | ) | | | (1.7 | ) | |
Total tractors, average for the period | | | 2,326 | | | | | | | | 2,497 | | | | | | | | (171 | ) | | | (6.8 | ) | % |
| | | | | | | | | | | | | | | |
| | Nine Months Ended September 30, | | | | | |
| | 2017 | | 2016 | | Increase (Decrease) |
(Dollars in thousands) | | $ | | % | | $ | | % | | $ | | % |
| | | | | | | | | | | | | | | |
REVENUE(1): | | | | | | | | | | | | | | | |
Freight | | $ | 200,670 | | 79.1 | | $ | 194,855 | | 82.2 | | $ | 5,815 | | 3.0 |
Brokerage | | | 27,979 | | 11.0 | | | 22,482 | | 9.5 | | | 5,497 | | 24.5 |
Logistics | | | — | | - | | | — | | - | | | — | | * |
Fuel surcharge | | | 25,145 | | 9.9 | | | 19,832 | | 8.4 | | | 5,313 | | 26.8 |
Total revenue | | | 253,794 | | 100.0 | | | 237,169 | | 100.0 | | | 16,625 | | 7.0 |
| | | | | | | | | | | | | | | |
OPERATING EXPENSES(1): | | | | | | | | | | | | | | | |
Salaries, wages and employee benefits | | | 71,723 | | 28.3 | | | 71,325 | | 30.1 | | | 398 | | 0.6 |
Fuel | | | 30,594 | | 12.1 | | | 26,708 | | 11.3 | | | 3,886 | | 14.5 |
Operations and maintenance | | | 27,475 | | 10.8 | | | 24,599 | | 10.4 | | | 2,876 | | 11.7 |
Purchased freight | | | 70,211 | | 27.7 | | | 59,775 | | 25.2 | | | 10,436 | | 17.5 |
Depreciation and amortization | | | 21,929 | | 8.6 | | | 22,687 | | 9.6 | | | (758) | | (3.3) |
Impairment | | | — | | - | | | — | | - | | | — | | * |
Other operating expenses | | | 16,907 | | 6.7 | | | 18,034 | | 7.6 | | | (1,127) | | (6.2) |
Total operating expenses | | | 238,839 | | 94.1 | | | 223,128 | | 94.1 | | | 15,711 | | 7.0 |
Operating ratio | | | 94.1% | | | | | 94.1% | | | | | | | |
Adjusted operating ratio(2) | | | 93.1% | | | | | 92.2% | | | | | | | |
INCOME FROM OPERATIONS | | $ | 14,955 | | 5.9 | | $ | 14,041 | | 5.9 | | $ | 914 | | 6.5 |
| | | | | | | | | | | | | | | |
OPERATING STATISTICS: | | | | | | | | | | | | | | | |
Total miles | | | 112,318,418 | | | | | 114,115,490 | | | | | (1,797,072) | | (1.6) |
Company-operated tractors | | | 1,158 | | | | | 1,173 | | | | | (15) | | (1.3) |
Owner-operated tractors | | | 454 | | | | | 442 | | | | | 12 | | 2.7 |
Number of trailers | | | 2,916 | | | | | 2,877 | | | | | 39 | | 1.4 |
Includes intersegment revenues and expenses, as applicable, which are eliminated in the Company’s consolidated results.
*indicates not meaningful.27
| (1)
| | Includes intersegment revenues and expenses, as applicable, which are eliminated in the Company’s consolidated results.
|
| (2)
| | Adjusted operating ratio is not a recognized measure under GAAP. For a definition of adjusted operating ratio and reconciliation of adjusted operating ratio to operating ratio, see “Non-GAAP Financial Measures” below.
|
Revenue. Total revenue increased 22.3% for the six months ended June 30, 2022 as compared to the same period in 2021. The increase in total revenue was primarily attributed to growth in our brokerage service offering, increases in fuel surcharge, and the sustained strong rate environment with rate per mile increasing 17.3%. The increase in total revenue was partially offset by a 7.2% decrease in total miles driven.
The following table sets forth the Company’s Specialized Solutions segment’s revenue operating expenses, operating ratio, adjusted operating ratio and operating incomeincreased 21.3% for the ninesix months ended SeptemberJune 30, 20172022 as compared to the same period in 2021, primarily due to higher fuel surcharge and 2016the strong freight rate environment, primarily in dollarsthe high security cargo, construction and manufacturing end-markets. Company freight increased 10.4% for the six months ended June 30, 2022 as compared to the same period in 2021 due to a 13.9% increase in company rate per mile, partially offset by a 3.1% decrease in miles driven due to supply chain delays in receiving revenue equipment. Owner operator freight increased 19.9% due to a 33.8% increase in owner operator rate per mile, partially offset by a 10.4% decrease in miles driven primarily due to a 6.5% decrease in average owner operator tractors. The Company deployed company-owned assets into end-markets with higher rates and margins, and as such, some of the excess volumes, for which the Company was unable to utilize company-owned assets, were captured through our brokerage service offering. This resulted in a percentage of its Specialized Solutions segment’s19.4% increase in brokerage revenue for the six months ended June 30, 2022 as compared to the same period in 2021. In this segment, total revenuebrokerage loads were up 9% and the increase or decrease inbrokerage revenue per load was up 10% due to higher rates during the dollar amounts of those items. The following table also sets forth certain operating statistics for the Company’s Specialized Solutions segment for the ninesix months ended SeptemberJune 30, 2017 and 2016.
SPECIALIZED SOLUTIONS
| | | | | | | | | | | | | | | |
| | Nine Months Ended September 30, | | | | | |
| | 2017 | | 2016 | | Increase (Decrease) |
(Dollars in thousands) | | $ | | % | | $ | | % | | $ | | % |
| | | | | | | | | | | | | | | |
REVENUE(1): | | | | | | | | | | | | | | | |
Freight | | $ | 250,255 | | 73.5 | | $ | 206,641 | | 77.2 | | $ | 43,614 | | 21.1 |
Brokerage | | | 55,820 | | 16.4 | | | 45,986 | | 17.2 | | | 9,834 | | 21.4 |
Logistics | | | 10,594 | | 3.1 | | | — | | - | | | 10,594 | | * |
Fuel surcharge | | | 23,620 | | 6.9 | | | 15,024 | | 5.6 | | | 8,596 | | 57.2 |
Total revenue | | | 340,289 | | 100.0 | | | 267,651 | | 100.0 | | | 72,638 | | 27.1 |
| | | | | | | | | | | | | | | |
OPERATING EXPENSES(1): | | | | | | | | | | | | | | | |
Salaries, wages and employee benefits | | | 97,880 | | 28.8 | | | 74,430 | | 27.8 | | | 23,450 | | 31.5 |
Fuel | | | 33,829 | | 9.9 | | | 22,368 | | 8.4 | | | 11,461 | | 51.2 |
Operations and maintenance | | | 57,990 | | 17.0 | | | 47,686 | | 17.8 | | | 10,304 | | 21.6 |
Purchased freight | | | 83,704 | | 24.6 | | | 64,161 | | 24.0 | | | 19,543 | | 30.5 |
Depreciation and amortization | | | 31,714 | | 9.3 | | | 27,711 | | 10.4 | | | 4,003 | | 14.4 |
Impairment | | | — | | - | | | 1,195 | | 0.4 | | | (1,195) | | (100.0) |
Other operating expenses | | | 22,416 | | 6.6 | | | 15,411 | | 5.8 | | | 7,005 | | 45.5 |
Total operating expenses | | | 327,533 | | 96.3 | | | 252,962 | | 94.5 | | | 74,571 | | 29.5 |
Operating ratio | | | 96.3% | | | | | 94.5% | | | | | | | |
Adjusted operating ratio(2) | | | 94.0% | | | | | 92.5% | | | | | | | |
INCOME FROM OPERATIONS | | $ | 12,756 | | 3.7 | | $ | 14,689 | | 5.5 | | $ | (1,933) | | (13.2) |
| | | | | | | | | | | | | | | |
OPERATING STATISTICS: | | | | | | | | | | | | | | | |
Total miles | | | 94,967,882 | | | | | 74,273,172 | | | | | 20,694,710 | | 27.9 |
Company-operated tractors | | | 1,382 | | | | | 1,091 | | | | | 291 | | 26.7 |
Owner-operated tractors | | | 294 | | | | | 241 | | | | | 53 | | 22.0 |
Number of trailers | | | 4,100 | | | | | 3,332 | | | | | 768 | | 23.0 |
*indicates not meaningful.
| (1)
| | Includes intersegment revenues and expenses, as applicable, which are eliminated in the Company’s consolidated results.
|
| (2)
| | Adjusted operating ratio is not a recognized measure under GAAP. For a definition of adjusted operating ratio and reconciliation of adjusted operating ratio to operating ratio, see “Non-GAAP Financial Measures” below.
|
Revenue. Total revenue increased 17.5%2022 as compared to $589.1 million for the nine months ended September 30, 2017 from $501.4 million for the nine months ended September 30, 2016, primarily as a result of the Recent Acquisitions. The changesame period in total revenue, excluding the effect of the Recent Acquisitions, was an increase of $19.9 million, or 4.0%, due to increases in fuel surcharge, freight and brokerage revenue.2021. Fuel surcharge revenue excluding the effect of the Recent Acquisitions, increased from $34.6 million101.7% for the ninesix months ended SeptemberJune 30, 20162022 as compared to $43.9 million for the nine months ended September 30, 2017, an increase of 26.9%. Freight revenue, excluding the effect of the Recent Acquisitions, increased 1.6% to $404.7 million for the nine months ended September 30, 2017 from $398.5 million for the nine months ended September 30, 2016. Brokerage revenue, excluding the effect of the Recent Acquisitions, increased 6.3% to $72.7 million for the nine months ended September 30, 2017 from $68.3 million for the nine months ended September 30, 2016same period in 2021 due to less capacity.increased fuel costs.
The Company’s Flatbed Solutions segment’s revenue was $253.8 millionincreased 22.9% for the ninesix months ended SeptemberJune 30, 2017 and $237.2 million for the nine months ended September 30, 2016, an increase of 7.0%. This increase was primarily a result of increases in rates, which produced increases of $5.8 million, or 3.0%, in freight revenue and $5.5 million, or 24.5%, in brokerage revenues despite 1.8 million fewer miles2022 as compared to the same period in 2016. The $5.3 million, or 26.8%, increase in fuel surcharge revenue also contributed to the increase in the Flatbed Solutions segment.
The Company’s Specialized Solutions segment’s revenue was $340.3 million for the nine months ended September 30, 2017 and $267.7 million for the nine months ended September 30, 2016, an increase of 27.1%, primarily as a result of the Recent Acquisitions. The increase in revenue, excluding the effect of the Recent Acquisitions, was $4.8 million, or 1.8%,2021, primarily due to increases in owner operator freight revenue, fuel surcharge. Fuel
surcharges, excludingsurcharge, and brokerage revenue and the effectstrong freight rate environment driven by strength in the construction, manufacturing, steel and agriculture industries. Owner operator freight increased 11.5% due to a 13.8% increase in owner operator rate per mile, partially offset by a 2.0% decrease in miles driven. The Company deployed company-owned assets into end-markets with higher rates and margins, and as such, some of the Recent Acquisitions, increased 27.6% to $19.2 millionexcess volumes, for which the Company strategically captured through our brokerage service offering. This resulted in a 86.9% increase in brokerage revenue for the ninesix months ended SeptemberJune 30, 2017 from $15.0 million for the same period in 2016. Freight revenue, excluding the effect of the Recent Acquisitions, increased less than 1.0% for the nine months ended September 30, 20172022 as compared to the same period in 20162021. In this segment, total brokerage loads were up 36% and the brokerage revenue excludingper load was up 38% due to higher rates during the effect of the Recent Acquisitions, decreased by 2.6% for the ninesix months ended SeptemberJune 30, 20172022 as compared to the same period in 2016.
In both segments, the2021. Fuel surcharge revenue increased 79.4% due to increased fuel costs. Company freight revenue decreased 8.7% due to supply chain delays in receiving revenue equipment which led to a 21.6% decrease in miles, partially offset by a 16.6% increase in fuel surcharge revenue was the result of increases in fuel prices which commenced in the fourth quarter of 2016 and continued through the third quarter of 2017, with only a less than 1% decrease in fuel prices in the second quarter of 2017.rate per mile.
Salaries, Wages and Employee Benefits. Salaries, wages and employee benefits expense, which consists of compensation for all employees, is primarily affected by the number of miles driven by company drivers, the rate per mile paid to company drivers, employee benefits including, but not limited to, health care and workers’ compensation, and to a lesser extent, the number of, and compensation and benefits paid to, non-driver employees. In general, the Specialized Solutions segment drivers receive a higher driver pay per total mile than Flatbed Solutions segment drivers due to the former requiring a higher level of training and expertise.
Salaries, wages and employee benefits expense increased 16.3% to $174.3 million5.8% for the ninesix months ended SeptemberJune 30, 2017 from $149.9 million for2022 as compared to the nine months ended September 30, 2016, primarily as a result of the Recent Acquisitions.same period in 2021. The increase in salaries, wages and employee benefits expense excluding the effect of the Recent Acquisitions, was 3.2%, or $4.9 million, and was primarily due to increased health insurance claims, higher driver pay in the Specialized Solutions segment and increased employee compensation, workers’ compensation premiums,headcount related to the expansion of corporate functions in legal, accounting and stock-based compensation, partiallysafety departments. Salaries, wages and employee benefits expense, as a percentage of consolidated revenue (excluding brokerage revenue), decreased 3.0% for the six months ended June 30, 2022 as compared to the same period in 2021.
The Company’s Specialized Solutions segment’s salaries, wages and employee benefits expense increased 9.2% for the six months ended June 30, 2022 compared to the same period in 2021, primarily as a result of increased health insurance claims and higher driver and non-driver pay. The increased driver pay was due to a 9% increase in driver rate, slightly offset by a 3.1% decrease in workers’ compensation claims.Company miles. Salaries, wages and employee benefits expense, as a percentage of Specialized Solutions revenue (excluding brokerage revenue), decreased 3.4% for the six months ended June 30, 2022 as compared to the same period in 2021.
The Company’s Flatbed Solutions segment’s salaries, wages and employee benefits expense was relatively flatdecreased 5.4% for the ninesix months ended SeptemberJune 30, 20172022 compared to the nine months ended September 30, 2016.
The Company’s Specialized Solutions segment had a $23.5 million, or 31.5%, increasesame period in salaries, wages and employee benefits expense for the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016,2021, primarily as a result of the Recent Acquisitions.decreased employee headcount and lower driver pay due to a 21.6% decrease in Company miles, partially offset by a 15% increase in driver rate. Salaries, wages and employee benefits expense, as a percentage of Flatbed Solutions revenue (excluding brokerage revenue), decreased 3.2% for the six months ended June 30, 2022 as compared to the same period in 2021.
Fuel. Fuel expense consists primarily of diesel fuel expense for company-owned tractors and fuel taxes. The primary factors affecting fuel expense are the cost of diesel fuel, the miles per gallon realized with company equipment and the number of miles driven by company drivers.
28
Table of Contents
Total fuel expense increased 53.4% for the six months ended June 30, 2022 as compared to the same period in 2021. This increase excluding the effect of the Recent Acquisitions, was 5.3%, or $3.9 million, and was primarily due to increased employee compensation, workers’ compensation premiums, and stock-based compensation,a 58.9% increase in fuel price, partially offset by a 9.5% decrease in employee health insurance costs.
Fuel. TotalCompany miles driven. The Company’s Specialized Solutions segment’s fuel expense increased $15.3 million, or 31.3%, to $64.4 million62.7% for the ninesix months ended SeptemberJune 30, 2017 from $49.1 million for2022 as compared to the nine months ended September 30, 2016. This increase wassame period in 2021, primarily as a result of the Recent Acquisitions and higherincrease in fuel prices. Excludingprice, partially offset by a 3.1% decrease in Company miles driven for the effect ofsix months ended June 30, 2022 as compared to the Recent Acquisitions,same period in 2021. The Company’s Flatbed Solutions segment’s fuel expense increased 15.8% or $7.8 million.33.5% for the six months ended June 30, 2022 as compared to the same period in 2021, as a result of the increase in fuel price, partially offset by a 21.6% decrease in Company miles driven for the six months ended June 30, 2022 as compared to the same period in 2021. The U.S. national average diesel fuel price, as published by the U.S. Department of Energy, was $2.578$4.866 for the ninesix months ended SeptemberJune 30, 2017,2022, compared to $2.250$3.062 for the same period in 2016, a 14.6% increase.2021.
The Company’s Flatbed Solutions segment’s fuel expense increased 14.5% to $30.6 million for the nine months ended September 30, 2017 from $26.7 million for the nine months ended September 30, 2016, primarily as a result of higher fuel prices and partially offset by a 1.6% decrease in total miles.
The Company’s Specialized Solutions segment’s fuel expense increased 51.2% to $33.8 million for the nine months ended September 30, 2017 from $22.4 million for the nine months ended September 30, 2016, primarily as the result of the Recent Acquisitions and higher fuel prices. Excluding the effect of the Recent Acquisitions, fuel expense in the Specialized Solutions segment increased 17.4% to $26.3 million as a result of higher fuel prices and an increase in total miles.
Operations and Maintenance. Operations and maintenance expense consists primarily of ordinary vehicle repairs and maintenance, costs associated with preparing tractors and trailers for sale or trade-in, driver recruiting, training and safety costs, permitting and pilot car fees and other general operations expenses. Operations and maintenance expense is primarily affected by the age of company-owned tractors and trailers, the number of miles driven in a period and driver turnover.
Operations and maintenance expense increased 18.4% to $86.3 million10.2% for the ninesix months ended SeptemberJune 30, 2017 from $72.9 million for the nine months ended September 30, 2016, primarily as a result of the Recent Acquisitions. Operating and maintenance expense increased 6.9% after adjusting for the effect of the Recent Acquisitions.
The Company’s Flatbed Solutions segment’s operations and maintenance expense increased $2.9 million, or 11.7%, for the nine months ended September 30, 20172022 as compared to the nine months ended September 30, 2016,same period in 2021 primarily asdue to a result of increased shop supplies, road$2.4 million increase in maintenance tire replacements, and tractor leaseupkeep costs as the Company’s utilization of operating leases to finance tractor purchases increasedand a $1.9 million increase in 2017.
pilot car and permit fees. The Company’s Specialized Solutions segment’s operations and maintenance expense increased $10.3 million, or 21.6%,13.6% for the ninesix months ended SeptemberJune 30, 20172022 as compared to the nine months ended September 30, 2016,same period in 2021 primarily as a result of the Recent Acquisitions. Excluding the effect of the Recent Acquisitions,a $2.0 million increase in pilot car and permit fees and a $2.1 million increase in maintenance and upkeep costs. The Company’s Flatbed Solutions segment’s operations and maintenance expense increased $2.0 million, or 4.1%,was generally consistent for the ninesix months ended SeptemberJune 30, 20172022 as compared to the ninesame period in 2021. Operations and maintenance expense, as a percentage of consolidated revenue (excluding brokerage revenue), was generally consistent for the six months ended SeptemberJune 30, 2016, primarily2022 as a result of increased tractor lease costs ascompared to the Company’s utilization of operating leases to finance tractor purchases increasedsame period in 2017 and higher pilot car expenses for alternative energy projects and other over-dimension loads, partially offset by decreases in in-house maintenance, road maintenance, and tire replacement costs.2021.
Purchased Freight. Purchased freight expense consists of the payments to owner operators, including fuel surcharge reimbursements, and payments to third-party capacity providers that haul loads brokered to them. Purchased freight expense generally takes into account changes in diesel fuel prices, resulting in higher payments during periods of increasing fuel prices.
Total purchased freight expense increased 23.6% from $120.5 million33.2% during the ninesix months ended SeptemberJune 30, 20162022 as compared to $148.9the same period in 2021. Purchased freight expense from owner operators increased $23.5 million, or 12.2%, during the ninesix months ended SeptemberJune 30, 2017, primarily2022 as compared to the same period in 2021 as a result of the Recent Acquisitions. Excluding the effect of the Recent Acquisitions on purchased freight expense, total purchased freight expense increased 7.0% to $128.9 million for the nine months ended September 30, 2017. Purchased freight expense from owner-operators, excluding the Recent Acquisitions, increased
7.2% from $69.1 million during the nine months ended September 30, 2016 to $74.1 million during the nine months ended September 30, 2017, primarily as a result of increases19.3% increase in fuel surcharge reimbursements made to owner-operators asowner operators’ rate, partially offset by a result of higher fuel prices.4.2% decrease in owner operator miles driven. Purchased freight expense from third-party capacity providers excluding the Recent Acquisitions, increased 8.0% from $49.1$68.4 million, or 81.9%, during the ninesix months ended SeptemberJune 30, 20162022 as compared to $53.0 million during the nine months ended September 30, 2017, primarilysame period in 2021, as a result of thean increase in rates on brokered loads.utilization of third-party capacity providers due to supply chain delays in receiving revenue equipment. In addition, the cost of diesel fuel increased by 58.9% during the six months ended June 30, 2022 as compared to the same period in 2021. Purchased freight expense, as a percentage of consolidated revenue, for the six months ended June 30, 2022, increased 3.4% as compared to the same period in 2021.
The Company’s Specialized Solutions segment’s purchased freight expense increased 26.2% during the six months ended June 30, 2022 as compared to the same period in 2021. Purchased freight expense from owner operators increased $8.8 million, or 15.2%, during the six months ended June 30, 2022 as compared to the same period in 2021, as a result of a 33.8% increase in owner operators' rate, partially offset by a 10.4% decrease in owner operator miles driven. Purchased freight expense from third-party capacity providers increased $21.5 million, or 37.4%, during the six months ended June 30, 2022 as compared to the same period in 2021, as a result of an increase in utilization of third-party capacity providers due to supply chain delays in receiving revenue equipment. As mentioned above, there was also an increase in the cost of diesel fuel during the six months ended June 30, 2022 as compared to the same period in 2021. Purchased freight expense, as a percentage of Specialized Solutions revenue, for the six months ended June 30, 2022, increased 1.1% as compared to the same period in 2021.
The Company’s Flatbed Solutions segment’s purchased freight expense increased 17.5% to $70.2 million36.7% for the ninesix months ended SeptemberJune 30, 2017 from $59.8 million for2022 as compared to the nine months ended September 30, 2016, primarily due to increasessame period in total loads requiring higher utilization of owner-operators and third party capacity providers in the Company’s Flatbed Solutions segment.2021. Purchased freight expense from owner-operatorsowner operators increased 10.6% to $49.2$14.7 million, or 10.9%, for the ninesix months ended SeptemberJune 30, 2017 from $44.4 million for2022 as compared to the nine months ended September 30, 2016.same period in 2021, as a result of a 13.8% increase in owner operators’ rate, partially offset by a 2.0% decrease in owner operator miles driven. Purchased freight expense from third-party capacity providers increased 39.1% from $13.5$46.8 million, or 144.4%, during the ninesix months ended SeptemberJune 30, 2016 to $18.8 million during the nine months ended September 30, 2017, primarily2022 as a result of the increase in brokered loads in the Company’s Flatbed Solutions segment.
The Company’s Specialized Solutions segment’s purchased freight expense increased 30.5% to $83.7 million during the nine months ended September 30, 2017 from $64.2 million during the nine months ended September 30, 2016, as a result of the Recent Acquisitions. Excluding the effect of the Recent Acquisitions on purchased freight expense, total purchased freight expense decreased slightly to $63.7 million for the nine months ended September 30, 2017. Purchased freight expense from owner-operators, excluding the Recent Acquisitions, was relatively flat, increasing only 1.0% from the nine months ended September 30, 2016compared to the nine months ended September 30, 2017. Purchased freight expense from third-party capacity providers, excluding the Recent Acquisitions, decreased 4.0% from $35.5 million during the nine months ended September 30, 2016 to $34.1 million during the nine months ended September 30, 2017,same period in 2021, primarily as a result of increased utilization of company driversthird-party capacity providers due to supply chain delays in receiving revenue equipment. As mentioned above, there was also an increase in the cost of diesel fuel during the current year.six months ended June 30, 2022 as compared to the same period in 2021. Purchased freight expense, as a percentage of Flatbed Solutions revenue, for the six months ended June 30, 2022, increased 5.6% as compared to the same period in 2021.
Depreciation and Amortization. Depreciation and amortization expense increased 6.4% to $53.8 million duringconsists primarily of depreciation for company-owned tractors and trailers and amortization of those financed with finance leases. The primary factors affecting these expense items include the ninesize of the fleet and age of company-owned tractors and trailers and the cost of new equipment. Amortization of intangible assets is also included in this expense.
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Depreciation and amortization expense was generally consistent for the six months ended SeptemberJune 30, 2017 from $50.5 million during2022 as compared to the nine months ended September 30, 2016, as a result of the Recent Acquisitions. After adjusting for the effect of the Recent Acquisitions,same period in 2021. The Company’s Specialized Solutions segment’s depreciation and amortization expense decreased 4.9%, primarily3.8% for the six months ended June 30, 2022 as compared to the same period in 2021 as a result of a 2.8% decrease in average tractor count in the segment’s fleet. The Company’s Flatbed Solutions segment’s depreciation and amortization expense increased 4.0% for the six months ended June 30, 2022 as compared to the same period in 2021 as a result of recent revenue equipment additions partially offset by disposals of fully depreciated revenue equipment.
Impairment. Impairment expense was $7.8 million for the six months ended June 30, 2022 related to goodwill, trade name intangibles, and customer relationships intangibles of an increasing shift in utilizationintegrated operating segment within the Company’s Specialized Solutions segment. There was no impairment expense for the six months ended June 30, 2021. The Company’s Specialized Solutions segment’s impairment expense was $7.8 million consisting of operating leases$5.7 million related to finance capital expenditures.
goodwill, $1.9 million related to trade name intangibles, and $0.2 million related to customer relationships intangibles for the six months ended June 30, 2022. The Company’s Specialized Solutions segment had no impairment expense for six months ended June 30, 2021. The Company’s Flatbed Solutions segment had a 3.3% decrease in depreciation and amortizationno impairment expense for the ninesix months ended SeptemberJune 30, 2017 as compared to the nine months ended September 30, 2016 primarily as a result of a 1.3% reduction in company-owned tractors.2022 and 2021.
The Company’s Specialized Solutions segment had a 14.4% increase in depreciation and amortization expense for the nine months ended September 30, 2017 as compared to the nine months ended September 30, 2016 as a result of the Recent Acquisitions. After adjusting for the effect of the Recent Acquisitions, depreciation and amortization expense decreased 6.1%, primarily as a result of an increasing shift in utilization of operating leases to finance capital expenditures.
Taxes and Licenses. Taxes and license expense increased from $6.9 million for the nine months ended September 30, 2016 to $7.9 million for the nine months ended September 30, 2017. Excluding the effect of the Recent Acquisitions, operating taxes and license expense, as a percentage of revenue, was 1.3% for the nine months ended September 30, 2017 and 1.4% for the nine months ended September 30, 2016.
Insurance and Claims. Insurance and claims expense consists of insurance premiums and the accruals the Company makes for estimated payments and expenses for claims for bodily injury, property damage, cargo damage and other casualty events. The primary factor affecting the Company’s insurance and claims expense is seasonality (the Company typically experiences higher accident frequency in winter months), the frequency and severity of accidents, trends in the development factors used in its accruals and developments in large, prior-year claims. The frequency of accidents tends to correlate with the miles the Company travels; however, insurance and claims expense could increase in periods where there are claims in excess of the Company’s self-insured retention. Insurance and claims expense increased 13.7% to $15.5 million53.6% during the ninesix months ended SeptemberJune 30, 2017 from $13.62022 as compared to the same period in 2021 primarily due to a $12.9 million during the nine months ended September 30, 2016, primarily as a result of the Recent Acquisitions. Excluding the effect of the Recent Acquisitions, insurance and claims increased 1.6%, or $0.2 million. This increase can be primarily attributed to an increase in insurance premium rates,claims, primarily resulting from claims over the Company’s self-insured retention, combined with a $4.7 million increase in our estimate of incurred but not recorded. These increases were partially offset by a marginal$3.1 million decrease in total miles of 0.8% excluding miles from the Recent Acquisitions.certain insurance premiums.
InterestOther (Income) Expense.Interest expense consists of cash interest, non-cash paid-in-kind interest, amortization and write-off of related issuance costs and fees and prepayment penalties.fees. Interest expense increased 20.2% to $21.1 million duringdecreased 21.9% for the ninesix months ended SeptemberJune 30, 2017 from $17.5 million during the nine months ended September 30, 2016. This increase was primarily attributable to an increase in amortization of debt issuance costs and higher interest rates on the Term Loan Facility2022 as compared to debt outstanding in 2016 under the Senior Term Loan and Equipment Term Loans.
Income Tax. Income tax expense decreased from $0.6 million for the nine months ended September 30, 2016 to a benefit of $3.4 million for the nine months ended September 30, 2017. Excluding the effect of the Recent Acquisitions, the increase was primarily the result of the increase in loss before provision (benefit) for income taxes of $13.4 million for the nine months ended September 30, 2017 compared to the same period in 2016.2021. This decrease was primarily attributable to lower interest rates achieved through the successful refinancing of our Term Loan Facility (as defined below) in March 2021, and decreases in the balance outstanding on the Term Loan Facility. Change in fair value of warrant liability was a gain of $4.7 million for the six months ended June 30, 2022 compared to a gain of $2.2 million for the same period in 2021. The change in fair value is directly related to the fair value of the warrant liability as of each period end as calculated using Level 1 and Level 3 inputs. The Company’s common stock purchase warrants expired during six months ended June 30, 2022 and are no longer exercisable.
Income Tax. Income tax expense was $11.1 million for the six months ended June 30, 2022 compared to income tax expense of $9.9 million for the same period in 2021. The effective tax rate was 22.6%26.6% for the ninesix months ended SeptemberJune 30, 2017,2022, compared to (69.1%)26.1% for the nine months ended September 30, 2016.same period in 2021. The difference between the Company’s effective income tax rate varies fromand the federal statutory rate primarily results from the mix of 35% primarily due toearnings with state income taxes andjurisdictions, combined with the impact of nondeductible permanent differences, including driver per diems, transaction expenses and withdrawn Private Daseke IPO expenses.
Non-GAAP Financial Measures
Adjusted EBITDA, Adjusted EBITDAR and Free Cash Flow
Adjusted EBITDA, Adjusted EBITDAR and free cash flow are not recognized measures under GAAP. The Company uses these non-GAAP measures as supplements to its GAAP results in evaluating certain aspects of its business, as described below.
The Company defines Adjusted EBITDA as netnontaxable income, (loss) plus (i) depreciation and amortization, (ii) interest expense, including other fees and charges associated with indebtedness, net of interest income, (iii) income taxes, (iv) acquisition-related transaction expenses (including due diligence costs, legal, accounting and other advisory fees and costs, retention and severance payments and financing fees and expenses), (v) non-cash impairments, (vi) losses (gains) on sales of defective revenue equipment out of the normal replacement cycle, (vii) impairments related to defective revenue equipment sold out of the normal replacement cycle, (viii) initial public offering-related expenses (which offering Private Daseke withdrew at the end of 2015), (ix) expensesprimarily related to the Business Combination and related transactions, (x) non-cash stock and equity-compensation expense, and (xi) accounting charges resulting from accounting for the possible earn-out pursuant to the Business Combination. The Company defines Adjusted EBITDAR as Adjusted EBITDA plus tractor operating lease charges.
The Company’s board of directors and executive management team use Adjusted EBITDA and Adjusted EBITDAR as key measures of its performance and for business planning. Adjusted EBITDA and Adjusted EBITDAR assist themchange in comparing its operating performance over various reporting periods on a consistent basis because they remove from the Company’s operating results the impact of items that, in their opinion, do not reflect the Company’s core operating performance. Adjusted EBITDA and Adjusted EBITDAR also allow the Company to more effectively evaluate its operating performance by allowing it to compare the results of operations against its peers without regard to its or its peers’ financing method or capital structure. Adjusted EBITDAR is used to view operating results before lease charges as these charges can vary widely among trucking companies due to differences in the way that trucking companies finance their fleet acquisitions. The Company’s method of computing Adjusted EBITDA is substantially consistent with that used in its debt covenants and also is routinely reviewed by its management for that purpose.
The Company believes its presentation of Adjusted EBITDA and Adjusted EBITDAR is useful because they provide investors and industry analysts the same information that the Company uses internally for purposes of assessing its core operating performance. However, Adjusted EBITDA and Adjusted EBITDAR are not substitutes for, or more meaningful than, net income (loss), cash flows from operating activities, operating income or any other measure prescribed by GAAP, and there are limitations to using non-GAAP measures such as Adjusted EBITDA and Adjusted EBITDAR. Certain items excluded from Adjusted EBITDA and Adjusted EBITDAR are significant components in understanding and assessing a company’s financial performance, such as a company’s cost of capital, tax structure and the historic costs of depreciable assets. Also, other companies in its industry may define Adjusted EBITDA and Adjusted EBITDAR differently than the Company does, and as a result, it may be difficult to use Adjusted EBITDA, Adjusted EBITDAR or similarly named non-GAAP measures that other companies may use to compare the performance of those companies to its performance. Because of these limitations, Adjusted EBITDA and Adjusted EBITDAR should not be considered measuresfair value of the income generated by the Company’s business or discretionary cash availablewarrant liability, and nondeductible expenses, primarily related to it to invest in the growth of its business. The Company’s management compensates for these limitations by relying primarily on the Company’s GAAP resultsexecutive compensation and using Adjusted EBITDA and Adjusted EBITDAR supplementally.goodwill impairment.
The Company defines free cash flow as Adjusted EBITDA less net capital expenditures (capital expenditures less proceeds from equipment sales). Its board of directors and executive management team use free cash flow to assess its performance and ability to fund operations and make additional investments. Free cash flow represents the cash that its business generates from operations, before taking into account cash movements that are non-operational. The Company believes its presentation of free cash flow is useful because it is one of several indicators of its ability to service debt, make investments and/or return capital to its stockholders. The Company also believes that free cash flow is one of several benchmarks used by investors and industry analysts for comparison of performance in its industry, although its measure of free cash flow may not be directly comparable to similar measures reported by other companies. Furthermore, free cash flow is not a substitute for, or more meaningful than, net income (loss), cash flows from operating activities, operating income or any other measure prescribed by GAAP, and there are limitations to using non-GAAP measures such as free cash flow. Accordingly, free cash flow should not be considered a measure of the income generated by its business or discretionary cash available to it to invest in the growth of its business. The Company’s management compensates for these limitations by relying primarily on the Company’s GAAP results and using free cash flow supplementally.
A reconciliation of Adjusted EBITDA, Adjusted EBITDAR and free cash flow to net income (loss) for the three and nine months ended September 30, 2017 and 2016 is as follows:
| | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
(In thousands) | | 2017 | | 2016 | | 2017 | | 2016 |
| | | | | | | | | | | | |
Net income (loss) | | $ | 50 | | $ | (1,257) | | $ | (11,802) | | $ | (1,486) |
Depreciation and amortization | | | 19,805 | | | 16,998 | | | 53,758 | | | 50,515 |
Interest income | | | (76) | | | (4) | | | (130) | | | (40) |
Interest expense | | | 8,624 | | | 6,724 | | | 24,947 | | | 17,521 |
Income tax provision (benefit) | | | (2,862) | | | 683 | | | (3,448) | | | 607 |
Acquisition-related transaction expenses | | | 773 | | | 16 | | | 2,255 | | | 289 |
Impairment | | | — | | | 1,195 | | | — | | | 1,195 |
Stock based compensation | | | 663 | | | — | | | 1,201 | | | — |
Withdrawn initial public offering-related expenses | | | — | | | 259 | | | — | | | 3,050 |
Net losses on sales of defective revenue equipment out of the normal replacement cycle | | | — | | | 22 | | | — | | | 718 |
Impairment on sales of defective revenue equipment out of the normal replacement cycle | | | — | | | — | | | — | | | 190 |
Expenses related to the Business Combination and related transactions | | | — | | | 344 | | | 2,034 | | | 344 |
Tractor operating lease charges | | | 4,448 | | | 3,610 | | | 12,366 | | | 9,324 |
Adjusted EBITDAR | | $ | 31,425 | | $ | 28,590 | | $ | 81,181 | | $ | 82,227 |
Less tractor operating lease charges | | | (4,448) | | | (3,610) | | | (12,366) | | | (9,324) |
Adjusted EBITDA | | $ | 26,977 | | $ | 24,980 | | $ | 68,815 | | $ | 72,903 |
Net capital expenditures | | | (14,930) | | | (10,549) | | | (23,922) | | | (31,236) |
Free cash flow | | $ | 12,047 | | $ | 14,431 | | $ | 44,893 | | $ | 41,667 |
Adjusted Operating Ratio
Adjusted operating ratio is not a recognized measure under GAAP. The Company uses adjusted operating ratio as a supplement to its GAAP results in evaluating certain aspects of its business, as described below. The Company defines adjusted operating ratio as (a) total operating expenses (i) less fuel surcharges, acquisition-related transaction expenses, non-cash impairment charges and initial public offering-related expenses (which offering Daseke withdrew at the end of 2015) and (ii) further adjusted for the net impact of the step-up in basis resulting from acquisitions (such as increased depreciation and amortization expense), as a percentage of (b) total revenue excluding fuel surcharge revenue.
The Company’s board of directors and executive management team view adjusted operating ratio, and its key drivers of revenue quality, growth, expense control and operating efficiency, as a very important measure of the Company’s performance. The Company believes fuel surcharge is often volatile and eliminating the impact of this source of revenue (by eliminating fuel surcharge from revenue and by netting fuel surcharge against fuel expense) affords a more consistent basis for comparing its results of operations between periods. The Company also believes excluding acquisition-related transaction expenses, additional depreciation and amortization expenses as a result of acquisitions, non-cash impairments and withdrawn initial public offering-related expenses enhances the comparability of its performance between periods.
The Company believes its presentation of adjusted operating ratio is useful because it provides investors and industry analysts the same information that it uses internally for purposes of assessing its core operating profitability. However, adjusted operating ratio is not a substitute for, or more meaningful than, operating ratio, operating margin or any other measure derived solely from GAAP measures, and there are limitations to using non-GAAP measures such as adjusted operating ratio. Although the Company believes that adjusted operating ratio can make an evaluation of its operating performance more consistent because it removes items that, in its opinion, do not reflect its core operations, other companies in its industry may define adjusted operating ratio differently than it does. As a result, it may be difficult to use adjusted operating ratio or similarly named non-GAAP measures that other companies may use to compare the performance of those companies to the Company’s performance. The Company’s management compensates for these limitations by relying primarily on its GAAP results and using adjusted operating ratio supplementally.
A reconciliation of adjusted operating ratio to operating ratio for each of the three and nine months ended September 30, 2017 and 2016 is as follows:
| | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
(Dollars in thousands) | 2017 | | 2016 | | 2017 | | 2016 |
| | | | | | | | | | | |
Total revenue | $ | 231,322 | | $ | 174,148 | | $ | 589,079 | | $ | 501,386 |
Fuel surcharge | | 18,008 | | | 12,756 | | | 48,331 | | | 34,562 |
Operating revenue, net of fuel surcharge | $ | 213,314 | | $ | 161,392 | | $ | 540,748 | | $ | 466,824 |
| | | | | | | | | | | |
Total operating expenses | $ | 225,618 | | $ | 168,066 | | $ | 579,759 | | $ | 485,050 |
Fuel surcharge | | 18,008 | | | 12,756 | | | 48,331 | | | 34,562 |
Acquisition-related transaction expenses | | 773 | | | 16 | | | 2,255 | | | 289 |
Impairment | | — | | | 1,195 | | | — | | | 1,195 |
Withdrawn initial public offering-related expenses | | — | | | 259 | | | — | | | 3,050 |
Expenses related to the Business Combination and related transactions | | — | | | 344 | | | 2,034 | | | 344 |
Net impact of step-up in basis of acquired assets | | 3,260 | | | 1,637 | | | 7,088 | | | 5,911 |
Adjusted operating expenses | $ | 203,577 | | $ | 151,859 | | $ | 520,051 | | $ | 439,699 |
| | | | | | | | | | | |
Operating ratio | | 97.5% | | | 96.5% | | | 98.4% | | | 96.7% |
Adjusted operating ratio | | 95.4% | | | 94.1% | | | 96.2% | | | 94.2% |
A reconciliation of the Company’s Flatbed Solutions segment’s adjusted operating ratio to operating ratio for the three and nine months ended September 30, 2017 and 2016 is as follows:
| | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
(Dollars in thousands) | | 2017 | | 2016 | | 2017 | | 2016 |
| | | | | | | | | | | | |
Total revenue(1) | | $ | 85,592 | | $ | 78,975 | | $ | 253,794 | | $ | 237,169 |
Fuel surcharge | | | 8,400 | | | 7,284 | | | 25,145 | | | 19,832 |
Operating revenue, net of fuel surcharge | | $ | 77,192 | | $ | 71,691 | | $ | 228,649 | | $ | 217,337 |
| | | | | | | | | | | | |
Total operating expenses | | $ | 80,837 | | $ | 75,181 | | $ | 238,839 | | $ | 223,128 |
Fuel surcharge | | | 8,400 | | | 7,284 | | | 25,145 | | | 19,832 |
Net impact of step-up in basis of acquired assets | | | 227 | | | 596 | | | 888 | | | 2,835 |
Adjusted operating expenses | | $ | 72,210 | | $ | 67,301 | | $ | 212,806 | | $ | 200,461 |
| | | | | | | | | | | | |
Operating ratio | | | 94.4% | | | 95.2% | | | 94.1% | | | 94.1% |
Adjusted operating ratio | | | 93.5% | | | 93.9% | | | 93.1% | | | 92.2% |
| (1)
| | Includes intersegment revenues and expenses, as applicable, which are eliminated in the Company’s consolidated results.
|
A reconciliation of the Company’s Specialized Solutions segment’s adjusted operating ratio to Operating Ratio for the three and nine months ended September 30, 2017 and 2016 is as follows:
| | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
(Dollars in thousands) | | 2017 | | 2016 | | 2017 | | 2016 |
| | | | | | | | | | | | |
Total revenue(1) | | $ | 147,631 | | $ | 96,534 | | $ | 340,289 | | $ | 267,651 |
Fuel surcharge | | | 9,756 | | | 5,588 | | | 23,620 | | | 15,024 |
Operating revenue, net of fuel surcharge | | $ | 137,875 | | $ | 90,946 | | $ | 316,669 | | $ | 252,627 |
| | | | | | | | | | | | |
Total operating expenses | | $ | 140,472 | | $ | 90,795 | | $ | 327,533 | | $ | 252,962 |
Fuel surcharge | | | 9,756 | | | 5,588 | | | 23,620 | | | 15,024 |
Impairment | | | — | | | 1,195 | | | — | | | 1,195 |
Net impact of step-up in basis of acquired assets | | | 3,033 | | | 1,040 | | | 6,200 | | | 3,076 |
Adjusted operating expenses | | $ | 127,683 | | $ | 82,972 | | $ | 297,713 | | $ | 233,667 |
| | | | | | | | | | | | |
Operating ratio | | | 95.2% | | | 94.1% | | | 96.3% | | | 94.5% |
Adjusted operating ratio | | | 92.6% | | | 91.2% | | | 94.0% | | | 92.5% |
(1)Includes intersegment revenues and expenses, as applicable, which are eliminated in the Company’s consolidated results.
Liquidity, and Capital Resources and Capital Requirements
Overview
The Company’s business requires substantial amounts of cash to cover operating expenses as well as to fund items such as cash capital expenditures on its fleet and other assets, working capital changes, principal and interest payments on debt obligations, letters of credit to support insurance requirements and tax payments. The Company expects net capital expenditures to be approximately $35.0 million for 2017.
The Company’s primary sources of liquidity have been provided by operations, issuances of capital stock and borrowings under its credit facility. The Company had the following sources of liquidity available at SeptemberJune 30, 20172022 and December 31, 2016.2021 (in millions).
| | | | | | | | | | | | | | |
(In thousands) | | September 30, 2017 | | December 31, 2016 | |
| | | | | | | | June 30, 2022 | | | December 31, 2021 | |
Cash | | $ | 112,510 | | $ | 3,695 | | $ | 152.0 | | | $ | 147.5 | |
Availability under line of credit | | | 70,000 | | | 32,958 | | | 125.3 | | | | 107.8 | |
Total | | $ | 182,510 | | $ | 36,653 | | $ | 277.3 | | | $ | 255.3 | |
The Company’s primary sources of liquidity have been cash provided by operating activities, issuances of capital stock and borrowings under its credit facilities. The Company also receives cash from sales of equipment.
Cash increased by $108.8 million from December 31, 2016The Company’s business requires substantial amounts of cash for operating expenses, including salaries and wages paid to September 30, 2017. This increase primarily resulted from proceedsemployees, contract payments to independent contractors, insurance and claims payments, tax payments, and others. The Company also uses large amounts of new debt financingcash and equities issued, net of debt repayments and share repurchases, in conjunction with the Business Combination. Net proceeds totaled $34.7 million. See Note 2 of Notes to Consolidated Financial Statementscredit for more information. Additionally, on September 19, 2017, the Company raised $63.6 million from an offering of 5,675,967 shares of its common stock. See Note 11 of the Notes to the Consolidated Financial Statements for more information.capital expenditures.
As of September 30, 2017, the Company has (i) a $350.0 million senior secured term loan credit facility, consisting of a $250.0 million term loan and up to $100.0 million of term loans funded under a delayed draw term loan facility, and (ii) an asset-based senior secured revolving credit facility with an aggregate maximum credit amount equal to $70.0 million (subject to availability under a borrowing base). The delayed draw term loans are available to support the Company’s acquisition activities. See Note 9 of Notes to Consolidated Financial Statements for more information regarding the Term Loan Facility, the ABL Facility, the Senior Term Loan and the Line of Credit.
On August 16, 2017, the Company obtained an amendment of the Term Loan Facility that increased the delayed draw incurrence condition relating to pro forma total leverage ratio to 4.25x from 3.50x, effective August 16, 2017 through the maturity of the delayed draw term loan facility in February 2018, which enabled the Company to access $60.5 million from the delayed draw term loan facility in the three months ended September 30, 2017. The Term Loan Facility amendment also increased the total leverage ratio covenant for the test periods ending September 30, 2017 and December 31, 2017 to 4.75x from 4.25x, with step-downs reverting to pre-amendment levels beginning in the test period ending March 31, 2018. On August 31, 2017, the Company obtained an amendment to the ABL Facility that, among other things, similarly modified the total leverage ratio covenant thereunder.
The Company believes it can finance its expected cash needs, including debt repayment, in the short-term with cash flows from operations, and borrowings available under the ABL Facility. The Company expects that the Term Loan Facility and ABL Facility will provide sufficient credit availability to support its ongoing operations, fund its new debt service requirements, capital expenditures, and working capital needs. Over the long-term, the Company will continue to have significant capital requirements, and expects to devote substantial financial resources to grow its operations and fund its acquisition activities. As a result of these funding requirements, the Company likely will need to sell additional equity or debt securities or seek additional financing through additional borrowings, lease financing or equity capital. The availability of financing or
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equity capital will depend upon the Company’s financial condition and results of operations as well as prevailing market conditions. If such additional borrowings, lease financing or equity capital is not available at the time it needs to incur such expenditures, then the Company may be required to extend the maturity of then outstanding indebtedness, rely on alternative financing arrangements or engage in asset sales.
Since its inception, the Company has acquired over twenty transportation companies. The primary reason for each acquisition was to add resources and services in geographic areas, customers and markets that the Company wants to serve. The Company will continue to evaluate potential acquisitions and any other sources of growth it considers in its best interest. Additionally, depending on the Company’s actual and anticipated sources and uses of liquidity, prevailing market conditions and other factors, the Company may from time to time seek to repay or repurchase outstanding debt or equity securities through cash purchases in the open market or privately negotiated transactions. The amounts involved in any such transactions may be material.
Capital Expenditures
The Company follows a dual strategy of both owning assets and employing asset-light activities, the latter of which reduces the capital expenditures required to operate the business. Asset-light activities are conducted utilizing tractors and trailers provided by owner operators and third-party carriers for significant portions of our flatbed and specialized services. Company-owned asset expenditures require substantial cash and financing (including finance and operating leases) to maintain a modern tractor fleet, refresh the trailer fleet, fund replacement and or growth in the revenue equipment fleet, and for the acquisition of real property and improvements to existing terminals and facilities.
Total property and equipment additions for the six months ended June 30, 2022 and 2021 are shown below (in millions):
| | | | | | | | |
| | Six Months Ended June 30, | |
| | 2022 | | | 2021 | |
Net cash capital expenditures (receipts) | | $ | 4.8 | | | $ | (8.6 | ) |
Property and equipment acquired with debt or finance lease obligations | | | 41.3 | | | | 29.2 | |
Total net property and equipment additions | | $ | 46.1 | | | $ | 20.6 | |
Total net property and equipment additions increased due to an increase in cash and financed equipment purchases and a decrease in equipment sales during the six months ended June 30, 2022.
The Company currently estimates its 2022 net capital expenditures to be $145 million to $155 million.
Operating leases
The Company entered into operating leases for revenue equipment with terms of one year to five years and real property with terms of less than one year to twenty years having right-of-use asset values at lease inception of $3.0 million and $15.7 million, respectively, for the six months ended June 30, 2022.
Material Debt
Overview
As of June 30, 2022, the Company had the following material debt:
•the Term Loan Facility and the ABL Facility;
•equipment and real estate term loans; and
•finance lease liabilities.
The amounts outstanding under such agreements were as follows (in millions):
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| | | | | | | | |
| | June 30, | | | December 31, | |
| | 2022 | | | 2021 | |
Term Loan Facility | | $ | 395.0 | | | $ | 397.0 | |
ABL Facility | | | — | | | | — | |
Equipment and real estate term loans | | | 182.6 | | | | 169.0 | |
Finance lease liabilities | | | 26.7 | | | | 28.5 | |
Total debt and finance lease liabilities | | | 604.3 | | | | 594.5 | |
Less current portion | | | (60.4 | ) | | | (55.5 | ) |
Less unamortized deferred financing fees | | | (7.0 | ) | | | (7.6 | ) |
Long-term debt and finance lease liabilities, less current portion and unamortized deferred financing fees | | $ | 536.9 | | | $ | 531.4 | |
The Company regularly evaluates its capital structure and liquidity position. From time to time and as opportunities arise, the Company may access the debt capital markets and modify its debt arrangements to optimize its capital structure and liquidity position.
See Note 7 of the Notes to Consolidated Financial Statements included herein for information regarding the Company’s material debt.
ABL and Term Loan Facilities and Equipment Financing Agreements
As of June 30, 2022, the Company has (i) a $400.0 million senior secured term loan credit facility (the Term Loan Credit Facility), and (ii) an asset-based senior secured revolving credit facility with an aggregate maximum credit amount equal to $150.0 million (that may be increased to $200.0 million, subject to availability under a borrowing base).
As of June 30, 2022, the Company had $182.6 million of equipment and real estate loans and $26.7 million of finance leases collateralized primarily by revenue equipment, with the majority of the equipment loans and finance leases having terms of 48 to 60 months.
As of June 30, 2022, the Company had no borrowings outstanding on the ABL Facility, $23.3 million in outstanding letters of credit, and $125.3 million available under the ABL Facility, based on current qualified collateral. Under the terms of the ABL Facility, lenders may issue up to $40 million of standby letters of credit on our behalf. Outstanding letters of credit reduce the availability on the $150 million ABL Facility. Standby letters of credit are generally issued for the benefit of regulatory authorities, insurance companies and state departments of insurance for the purpose of satisfying certain collateral requirements, primarily related to automobile, workers’ compensation, and general insurances liabilities.
Cash Flows
The Company’s summary statements of cash flows information for the ninesix months ended SeptemberJune 30, 20172022 and 20162021 is set forth in the table below:below (in millions):
| | | | | | |
| | Nine Months Ended September 30, |
(In thousands) | | 2017 | | 2016 |
| | | | | | |
Net cash provided by operating activities | | $ | 26,458 | | $ | 49,108 |
Net cash provided by (used in) investing activities | | $ | (101,446) | | $ | 1,281 |
Net cash provided by (used in) financing activities | | $ | 183,833 | | $ | (50,506) |
| | | | | | | | |
| | Six Months Ended June 30, | |
| | 2022 | | | 2021 | |
Net cash provided by operating activities | | $ | 51.9 | | | $ | 58.1 | |
Net cash (used in) provided by investing activities | | $ | (24.1 | ) | | $ | 8.6 | |
Net cash used in financing activities | | $ | (23.6 | ) | | $ | (130.9 | ) |
Operating Activities. Cash provided by the Company’s operating activities consists of net loss adjusted for certain non-cash items, including depreciation and amortization, deferred interest, gain/loss on disposal of property and equipment, deferred income taxes, deferred gain and interest recognized on sales-type leases, stock-based compensation, bad debt expense and the effect of changes in working capital and other activities.
Cash provided by operating activities was $26.5$51.9 million during the ninesix months ended SeptemberJune 30, 20172022 and consisted of $11.8$30.7 million of net lossincome plus $59.3$46.6 million of non-cash items, consisting primarily of depreciation, amortization, deferred taxes, gain on disposition of property and equipment, stock-based compensation, and impairment, partially offset by $4.8 million in deferred taxes, less $16.2$25.4 million of net cash used forin working capital and other activities. Cash used forin working capital and other activities during the ninesix months ended SeptemberJune 30, 2017 primarily2022 reflect a $28.6an increase of $46.1 million increase in accounts receivable, $3.8an increase of $4.7 million in payments received on sales-type leases, and a $8.4 million increase in accounts payable and accrued expenses. Cash provided by operating activities was $49.1 million during the nine months ended September 30, 2016 and consisted of $1.5 million of net loss plus $53.3 million of non-cash items, consisting primarily of depreciation and amortization, less $2.4 million of net cash used for working capital and other activities. Cash used for working capital and other activities during the nine months ended September 30, 2016 primarily reflect a $7.2 million increase in accounts receivable, driverdrivers’ advances and other receivables, a $1.3and an increase of $3.9 million decrease in accounts payable and accrued expenses,other current assets, partially offset by a $3.5an increase of $26.1 million decrease in prepaidaccrued expenses and other assetsliabilities and $2.8an increase of $3.2 million in payments received on sales-type leases.accounts payable.
The $22.9$6.2 million decrease in cash provided by operating activities during the ninesix months ended SeptemberJune 30, 20172022, as compared with the ninesix months ended SeptemberJune 30, 2016, excluding the Recent Acquisitions,2021, was primarily the result of a $4.7 million increase in net loss, a $4.1 million decrease in deferred tax liabilities, a $2.2 million decrease in depreciation, and a $10.9 million increasedecreases in net cash used forprovided by working capital of $6.9 million and other activities.decreases in non-cash items of $2.0 million, reduced by a $2.7 million improvement in net income.
Investing Activities. Cash flows fromused in investing activities decreased from $1.3was $24.1 million for the six months ended June 30, 2022 as compared to cash provided by investing activities of $8.6 million for the ninesix months ended SeptemberJune 30, 20162021. This change is primarily due to $101.4a $19.3 million used in investing activitiescash payment for the nine months ended September 30, 2017 due to net cash paid for acquisitions of $91.1 million andSJ Transportation acquisition, an increase of $7.2 million in netcash equipment purchases, and a decrease of $6.2 million in cash receipts from sales of revenue equipment for the six months ended June 30, 2022.
32
Table of $11.6Contents
Total net cash capital expenditures (receipts) for the six months ended June 30, 2022 and 2021 are shown below (in millions):
| | | | | | | | |
| | Six Months Ended June 30, | |
| | 2022 | | | 2021 | |
Revenue equipment (tractors, trailers and trailer accessories) | | $ | 20.4 | | | $ | 15.2 | |
Buildings and building improvements | | | 2.0 | | | | 0.3 | |
Other | | | 2.8 | | | | 2.5 | |
Total cash capital expenditures | | | 25.2 | | | | 18.0 | |
Less: Proceeds from sales of property and equipment | | | 20.4 | | | | 26.6 | |
Net cash capital expenditures (receipts) | | $ | 4.8 | | | $ | (8.6 | ) |
Financing Activities. Cash used in financing activities decreased from $130.9 million for the six months ended June 30, 2021 to $23.6 million for the six months ended June 30, 2022. During the six months ended June 30, 2022, we had approximately $87.0 million less net debt-related payments compared to same period in 2021, primarily as the result of the Company refinancing the Term Loan Facility during the six months ended June 30, 2021. In addition, during the six months ended June 30, 2022, we received $9.4 million in the nine months ended September 30, 2017proceeds from warrant exercises compared to none in the same period in 2016.
Total net capital expenditures for2021. In addition, during the ninesix months ended SeptemberJune 30, 20172021, we repurchased $10.5 million in common stock compared to none in the same period in 2022.
Critical Accounting Estimates
The preparation of the Company’s consolidated financial statements in accordance with US GAAP requires it to make estimates and 2016assumptions that impact the amounts reported in its consolidated financial statements and accompanying notes. Therefore, the reported amounts of assets, liabilities, revenue, expenses, and associated disclosures of contingent assets and liabilities are shown below:affected by these estimates and assumptions. The Company evaluates these estimates and assumptions on an ongoing basis, utilizing historical experience, consultation with experts and other methods considered reasonable in the particular circumstances. Nevertheless, actual results may differ significantly from these estimates and assumptions, and it is possible that materially different amounts will be reported using differing estimates or assumptions.
| | | | | | |
| | Nine Months Ended September 30, |
(In thousands) | | 2017 | | 2016 |
| | | | | | |
Revenue equipment (tractors, trailers and trailer accessories) | | $ | 14,391 | | $ | 1,904 |
Buildings and building improvements | | | 174 | | | 401 |
Other | | | 1,000 | | | 838 |
Total cash capital expenditures | | $ | 15,565 | | $ | 3,143 |
Less: Proceeds from sales of property and equipment | | | 5,252 | | | 4,424 |
Net cash capital (proceeds) expenditures(1) | | $ | 10,313 | | $ | (1,281) |
| (1)
| | The Company acquires property and revenue equipment with debt and capital lease obligations. For the nine months ended September 30, 2017 and 2016, the Company incurred $13.6 million and $32.5 million, respectively, of debt and capital lease obligations to acquire property and revenue equipment.
|
The following tables provide detailsestimation uncertainty and have had or are reasonably likely to have a material impact on the cash and noncash components of gross capital expenditures for the Company’s reportable segments for the three and nine months ended September 30, 2017 and 2016 (in thousands):
| | | | | | | | | | | | |
| | Flatbed | | Specialized | | | | | | |
| | Solutions | | Solutions | | Corporate/ | | Consolidated |
| | Segment | | Segment | | Eliminations | | Total |
Three Months Ended September 30, 2017 | | | | | | | | | | | | |
Cash flows from investing activities | | | | | | | | | | | | |
Purchases of property and equipment | | $ | 2,297 | | $ | 6,407 | | $ | 55 | | $ | 8,759 |
Proceeds from sale of property and equipment | | | (110) | | | (2,190) | | | — | | | (2,300) |
| | | | | | | | | | | | |
Noncash investing and financing activities | | | | | | | | | | | | |
Property and equipment acquired with debt or capital lease obligations | | | 2,298 | | | 6,172 | | | — | | | 8,470 |
Gross capital expenditures | | $ | 4,485 | | $ | 10,389 | | $ | 55 | | $ | 14,929 |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
Three Months Ended September 30, 2016 | | | | | | | | | | | | |
Cash flows from investing activities | | | | | | | | | | | | |
Purchases of property and equipment | | $ | 326 | | $ | 1,029 | | $ | 19 | | $ | 1,374 |
Proceeds from sale of property and equipment | | | (164) | | | (281) | | | — | | | (445) |
| | | | | | | | | | | | |
Noncash investing and financing activities | | | | | | | | | | | | |
Property and equipment acquired with debt or capital lease obligations | | | 7,698 | | | 1,922 | | | — | | | 9,620 |
Gross capital expenditures | | $ | 7,860 | | $ | 2,670 | | $ | 19 | | $ | 10,549 |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | Flatbed | | Specialized | | | | | | |
| | Solutions | | Solutions | | Corporate/ | | Consolidated |
| | Segment | | Segment | | Eliminations | | Total |
Nine Months Ended September 30, 2017 | | | | | | | | | | | | |
Cash flows from investing activities | | | | | | | | | | | | |
Purchases of property and equipment | | $ | 2,521 | | $ | 12,941 | | $ | 103 | | $ | 15,565 |
Proceeds from sale of property and equipment | | | (707) | | | (4,545) | | | — | | | (5,252) |
| | | | | | | | | | | | |
Noncash investing and financing activities | | | | | | | | | | | | |
Property and equipment acquired with debt or capital lease obligations | | | 4,839 | | | 8,770 | | | — | | | 13,609 |
Gross capital expenditures | | $ | 6,653 | | $ | 17,166 | | $ | 103 | | $ | 23,922 |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
Nine Months Ended September 30, 2016 | | | | | | | | | | | | |
Cash flows from investing activities | | | | | | | | | | | | |
Purchases of property and equipment | | $ | 688 | | $ | 2,299 | | $ | 156 | | $ | 3,143 |
Proceeds from sale of property and equipment | | | (2,756) | | | (1,668) | | | — | | | (4,424) |
| | | | | | | | | | | | |
Noncash investing and financing activities | | | | | | | | | | | | |
Property and equipment acquired with debt or capital lease obligations | | | 15,019 | | | 17,498 | | | — | | | 32,517 |
Gross capital expenditures | | $ | 12,951 | | $ | 18,129 | | $ | 156 | | $ | 31,236 |
Financing Activities. Cash flows from financing activities increased from $50.5 million used in financing activities for the nine months ended September 30, 2016 to $183.8 million provided by financing activities for the nine months ended September 30, 2017. This increase was primarily a result of a recapitalization and refinancing of outstanding long-term debt in conjunction with the Business Combination. The recapitalization included $64.6 million of proceeds upon issuance of common stock and $65.0 million of proceeds upon issuance of Series A Preferred Stock, partially offset by $36.2 million in repurchases of common stock. Cash inflows from the recapitalization and proceeds from a new $250.0 million term loan (discussed under Material Debt below) were utilized in part for repayments of $66.7 million in subordinated debt, $211.1 million in long-term debt, $16.7 million on the line of credit and $14.2 million in financing fees. Excluding cash flows from the Business Combination, cash flows from financing activities included $6.9 million net repayments on the line of credit, $100.0 million advance on the delayed draw term loan facility, net of $16.6 million in repayments of long-term debt, $3.7 million Series A and Series B Preferred Stock dividends and proceeds of $63.6 million for the September 2017 issuance of common stock.
Material Debt
Overview
As of September 30, 2017, the Company had the following material debt:
| ·
| | the Term Loan Facility and the ABL Facility;
|
| ·
| | secured equipment loans and capital lease agreements; and
|
| ·
| | bank mortgage secured by real estate
|
The amounts outstanding under such agreements were as follows as of September 30, 2017 (in thousands):
| | | |
Term Loan Facility | | $ | 348,462 |
Mortgages | | | 3,730 |
Equipment term loans and capital leases | | | 83,478 |
Total long-term debt and capital leases | | | 435,670 |
Less: current portion | | | (26,514) |
Long-term debt and capital leases, less current portion | | $ | 409,156 |
See Note 9 of Notes to Consolidated Financial Statements for information regarding the Company’s material debt.
Off-Balance Sheet Arrangements
The Company’sCompany's financial condition or results of operations, liquidity, capital expenditures and capital resources are not materially affected by off-balance sheet transactions. Daseke had stand-by lettersoperations. See “Critical Accounting Estimates” included in Part II, Item 7 of credit in the amount of $11.1 million at September 30, 2017. The letters of credit provide collateral primarily for liability insurance claims. Also, the Company leases certain revenue equipment, terminals and office building facilities under non-cancelable operating leases. Daseke’s rent expense under these leases for the nine months ended September 30, 2017 was approximately $17.2 million.
At September 30, 2017, there were 17,520,332 shares of common stock issuable upon exercise of outstanding warrants.
Critical Accounting Policies
The Company’s significant accounting policies are described in Note 1 of Notes to Consolidated Financial Statements in the Company’s Currentour Annual Report on Form 8-K/A filed on March 16, 2017. The Company considers certain10-K for the year ended December 31, 2021, for a discussion of theseour critical accounting policies to be “critical”estimates; there have been no material changes to the portrayal of the Company’s financial position and results of operations, as they require the application of significant judgment by management. As a result, they are subject to an inherent degree of uncertainty. The Company identifies and discusses these “critical” accounting policies in the Management’s Discussion and Analysis of Financial Condition and Results of Operations section of the Company’s Current report on Form 8-K/A filed on March 16, 2017. Management bases its estimates and judgments on historical experience and on various other factors that management believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. On an ongoing basis, management evaluates its estimates and judgments, including those considered “critical.” Management has discussed the development, selection and evaluation ofcritical accounting estimates including those deemed “critical,” and the associated disclosures in this Quarterly Report on Form 10-Q with the Audit Committee of the Company’s board of directors.as disclosed therein.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
There have been no material changes in the Company’s market risk since December 31, 2016.2021. For further information on the Company’s market risk, refer to “Item 2.01. Completion of Acquisition or Disposition of Assets—Management’s Discussion and Analysis of Financial Condition and Results of Operations and Quantitative and Qualitative Disclosures About Market Risk—7A. Quantitative and Qualitative Disclosures About Market Risk” in the Company’s CurrentAnnual Report on Form 8-K/A10-K filed March 16, 2017.on February 23, 2022.
Item 4. Controls and Procedures
On February 27, 2017, Hennessy consummated the merger of Hennessy’s wholly-owned subsidiary, HCAC Merger Sub, Inc., with and into Daseke, Inc., with Daseke, Inc. surviving as a direct wholly-owned subsidiary of Hennessy. Upon the closing of the Business Combination on February 27, 2017, the sole business conducted by the Company is the business conducted by Daseke. Also, as a result of the Business
Combination, the internal control over financial reporting utilized by Daseke prior to the Business Combination became the internal control over financial reporting of the Company.
Evaluation of Disclosure Controls and Procedures
The Company carried outAs of the end of the period covered by this Report, the Company’s management conducted an evaluation, under the supervision and with the participation of its management, including the Chief Executive Officerprincipal executive and Chief Financial Officer,principal financial officers, of the effectiveness of the design and operation of the Company’s “disclosuredisclosure controls and procedures”procedures (as defined in Rule 13a-15(e) of the Securities and Exchange Act Rule 13a-15(e)) as of the end of the period covered by1934 (the Exchange Act)). Based on this report. Based upon that evaluation, the Chief Executive Officerprincipal executive and Chief Financial Officerprincipal financial officers concluded that the Company’sour disclosure controls and procedures were effective as of SeptemberJune 30, 2017.2022.
Changes in Internal Control over Financial Reporting
There werehave been no changes in the Company’sour internal control over financial reporting (as defined in RuleRules 13a-15(f) or 15d-15(f) of the Exchange Act) that occurred during the ninethree months ended SeptemberJune 30, 20172022 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
PART II.II – OTHER INFORMATION
Item 1. Legal Proceedings
The Company is party to a variety of legal proceedingsand its subsidiaries are involved in litigation and claims primarily arising in the normal course of business. Whilebusiness, which include claims for personal injury or property damage incurred in the resultstransportation of these proceedings cannot be predicted with certainty,freight. Based on its knowledge of the final outcomefacts and, in certain
33
Table of these proceedings areContents
cases, advice of outside counsel, the Company believes the resolution of claims and pending litigation will not expected to have a material adverse effect on the Company’s financial position, results of operations or cash flows.flows, and the Company and its subsidiaries are not currently a party to, nor is their property currently subject to, any material legal proceedings other than ordinary routine litigation incidental to the business, and we are not aware of any such proceedings contemplated by governmental authorities.
Item 1A. Risk Factors
There have been no material changes in the risks facing the Company as described in the Company’s CurrentAnnual Report on Form 8-K filed on March 3, 2017, as amended on March 16, 2017 and May 4, 2017.10-K for the year ended December 31, 2021.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds34
During the three months ended September 30, 2017, in connection with, and as partial consideration for, certain acquisitions, the Company issued shares of common stock that were not registered under the Securities Act of 1933, as amended (the Securities Act), in reliance on the private offering exemption of Section 4(a)(2) of the Securities Act or the private offering safe harbor provision of Rule 506 of Regulation D promulgated thereunder based on the following factors: (i) the number of offerees or purchasers, as applicable, (ii) the absence of general solicitation, (iii) investment representations obtained from those receiving shares of the Company’s common stock, including with respect to their status as accredited investors, (iv) the provision of appropriate disclosure, and (v) the placement of restrictive legends on the certificates reflecting the securities. For additional information, see Note 3 of Notes to Consolidated Financial Statements.
Item 6. Exhibits
EXHIBIT INDEX
| |
| | |
Exhibit No. | | Exhibit |
3.1
|
|
3.1 | Second Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed by the registrant on March 3, 2017). |
| | |
3.2 | | Charter Amendment to Second Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.2 to the Quarterly Report on Form 10-Q filed by the registrant on August 6, 2020). |
|
|
3.3 | By-Laws (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed by the registrant on May 25, 2018). |
|
|
3.4 | First Amendment to the By-Laws of Daseke, Inc. (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed by the registrant on August 18, 2020). |
|
|
3.5 | Certificate of Designations, Preferences, Rights and Limitations of 7.625% Series A Convertible Cumulative Preferred Stock (incorporated by reference to Exhibit 3.2 to the registrant’s Current Report on Form 8-K filed by the registrant on March 3, 2017). |
| | |
3.3
| 31.1* | Bylaws (incorporated by reference to Exhibit 3.3 to the registrant’s registration statement on Form S-1 (File No. 333-205152) filed by the registrant on June 22, 2015).
|
| | |
10.1
| | Amendment No. 1 to Term Loan Agreement, dated as of August 16, 2017, among Daseke Companies, Inc., Daseke, Inc., Credit Suisse AG, Cayman Islands Branch, as administrative agent and collateral agent, and the lenders party thereto (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed by the registrant on August 22, 2017).
|
| | |
10.2*
| | First Amendment to Fifth Amended and Restated Revolving Credit and Security Agreement, dated as of August 31, 2017, by and among Daseke, Inc. Daseke Companies, Inc., each of its subsidiaries party thereto, the lenders party thereto and PNC Bank, National Association.
|
| | |
31.1*
| | Chief Executive Officer certification under Section 302 of Sarbanes-Oxley Act of 2002. |
| | |
31.2* | | Chief Financial Officer certification under Section 302 of Sarbanes-Oxley Act of 2002. |
| | |
32.1** | | Chief Executive Officer certification under Section 906 of Sarbanes-Oxley Act of 2002. |
| | |
32.2** | | Chief Financial Officer certification under Section 906 of Sarbanes-Oxley Act of 2002. |
| | |
101.INS* | | Inline XBRL Instance Document. |
| | |
101.SCH* | | Inline XBRL Taxonomy Extension Schema Document. |
| | |
101.CAL* | | Inline XBRL Taxonomy Extension Calculation Linkbase Document. |
| | |
101.DEF* | | Inline XBRL Taxonomy Extension Definition Linkbase Document. |
| | |
101.LAB* | | Inline XBRL Taxonomy Extension Label Linkbase Document. |
| | |
101.PRE* | | Inline XBRL Taxonomy Extension Presentation Linkbase Document. |
_____________________________
| |
*
| Filed herewith.
|
**104
| Furnished herewith.Inline Cover Page Interactive Data File (embedded within the Inline XBRL document).
|
| |
* | Filed herewith. |
** | Furnished herewith. |
|
|
35
SIGNATURES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| | |
Date: August 2, 2022 | | DASEKE, INC. |
Date November 9, 2017
| DASEKE, INC.
|
|
| By: | /s/ Jason Bates |
| By:Name:
| /s/ R. Scott WheelerJason Bates
|
| Name:Title:
| R. Scott Wheeler
|
| Title:
| Executive Vice President and Chief Financial Officer
|
| | (On behalf of the Registrant and as the Registrant’s Principal Financial
|
| | Officer)
|
36
